N 


. 


Publications  of  the 

Carnegie  Endowment  for  International  Peace 

Division  of  Economics  and  History 
John  Bates  Clark,  Director 


JAPANESE  MONOGRAPHS 

EDITED  BY 

BARON  Y.  SAKATANI,  D.C.L. 

Formerly  Minister  of  Finance  of  Japan 

Conscription  System  in  Japan,  by  Gotaro  Ogawa. 
Expenditures  of  the  Russo-Japanese  War,  by  Gotaro  Ogawa. 
Military  Industries  of  Japan,  by  Ushisaburo  Kobayashi. 
War  and  Armament  Loans  of  Japan,  by  Ushisaburo  Kobayashi. 
War  and  Armament  Taxes  of  Japan,  by  Ushisaburo  Kobayashi. 
Expenditures  of  the  Sino-Japanese  War,  by  Giichi  Ono. 
War  and  Armament  Expenditures  of  Japan,  by  Giichi  Ono. 


WAR  AND  ARMAMENT  LOANS 
OF  JAPAN 


BY 
USHISABURO  KOBAYASHI,  D.  C.  L. 


NEW  YORK 
OXFORD  UNIVERSITY  PRESS 

AMERICAN  BRANCH:  35  WEST  32ND  STREET 
LONDON,  TORONTO,  MELBOURNE.  AND  BOMBAY 

1922 


COPYRIGHT    1922 

BY   THE 
CARNEGIE    ENDOWMENT    FOR    INTERNATIONAL    PEACE 


THE  RUMFORD  PRESS,  CONCORD,  N.  H. 


3  SOS"  BARBARA  COLLEGE  LIBRARY 

479/fc 

S*-O 

NOTE   BY  THE  DIRECTOR 

The  plans  of  the  Division  of  Economics  and  History  of  the 
Carnegie  Endowment  for  International  Peace  have  been 
transformed  by  the  World  War.  Problems  now  calling  for 
study  transcend  in  importance  those  with  which  this  Division 
has  been  dealing  and  material  for  research  and  record  so  far 
transcends  any  that  was  formerly  available  that  it  will  demand 
almost  exclusive  attention  for"some  years  to  come.  A  new 
world  has  evolved  suddenly  out  of  the  world  which  we  knew 
and  the  transformation  extends  to  the  foundations  of  gov- 
ernment and  of  economic  life. 

The  process  of  warfare  itself  is  now  so  unlike  that  of  former 
days  that  many  military  rules  of  the  past  have  gone  into  the 
scrap  basket.  The  late  war  ended  when  its  deadliest  tools 
had  barely  been  brought  into  action.  The  peoples  have 
fought  as  they  had  worked,  by  machinery,  mechanical  and 
chemical  engines  of  destruction  have  decided  the  result  and 
will  decide  in  like  manner  the  result  of  all  wars  of  the  future. 
Machine  shops  and  chemical  laboratories  will  so  largely 
determine  what  armies  shall  win  that  fighting  strength  will 
be  as  much  a  matter  of  available  capital  and  of  science  in 
applying  it  as  of  numbers  of  troops  and  strategy  in  directing 
them.  It  is  safe  to  say  that  the  death  dealing  arts  and  instru- 
ments will  far  surpass  in  destructiveness  those  which  made 
the  late  war  so  deadly,  and  to  a  soldier  of  the  future  the  order 
to  march  into  a  cloud  of  poisonous  gas  and  a  whirlwind  of 
missies  will  resemble  an  order  to  plunge  into  the  rapids  of 
Niagara.  This  is  one  central  and  obvious  fact  which  the 
war  has  taught  us  and  it  has  many  corollaries,  some  of  which 
have  to  do  with  the  increased  costs  of  war  and  the  importance 
of  the  particular  resources  that  make  a  nation  powerful  for 
offense  and  defense;  but  there  are  less  conspicuous  economic 
facts  which  are  more  fundamental,  since  they  may  determine 
where  and  when,  if  at  all,  wars  shall  hereafter  occur. 

Causes  of  warfare  are  always  partly  economic  and  those 
which  incited  the  recent  one  were  mainly  so.  The  business 
plans  of  a  powerful  state  reached  to  the  ends  of  the  earth 


Vi  NOTE   BY   THE   DIRECTOR 

and  so  crossed  and  interlaced  the  claims  of  other  states  that 
some  writers,  then  and  afterwards,  pronounced  the  war  inevi- 
table. If  we  assume  a  settled  purpose  on  the  part  of  such  a 
state  to  encroach  on  the  rights  of  others,  we  may  say  that  it 
doubtless  was  inevitable.  The  victory  of  the  defending 
countries  has  saved  them  from  an  immediate  and  intolerable 
domination,  but  it  can  not  be  taken  as  an  assured  fact  that 
similar  attempts  will  never  again  be  made.  The  economic 
inducement  continues  and  the  means  may  at  some  time  be 
forthcoming. 

Within  the  several  states  war  has  democratized  industry, 
giving  to  labor  an  increase  of  control — a  change  that  if  con- 
tinued will  entail  momentous  consequences;  but  still  greater 
effects  have  been  produced  on  the  relations  of  states  to  each 
other.  The  world  as  a  whole  has  changed  more  than  its 
component  parts  and  the  new  relation  of  the  parts  to  one 
another  is  the  critical  element  in  the  situation.  The  great 
increase  in  the  economic  functions  of  governments  is  one 
cause  of  this  condition.  Within  the  great  international  com- 
munity in  which  the  several  states  are  units  extensive  eco- 
nomic functions  have  gravitated  into  the  hands  of  govern- 
ments and  caused  them  to  face  each  other  as  business  rivals 
and  to  deal  with  each  other  in  a  multitude  of  ways  in  which 
the  merely  self-seeking  policy  of  private  business  is  intoler- 
able. Power  to  invoke  principles  of  justice  and  international 
law  as  interpreted  by  a  competent  court  has  become  an  in- 
dispensable means  of  allaying  strife  and  this  fact  exalts  to 
supreme  importance  the  high  court  of  nations  which  has  just 
been  established.  It  magnifies  also  the  importance  of  the 
economic  facts  and  principles  with  which  the  law  itself  will 
have  to  deal.  It  is  not  merely  individual  men  or  private 
corporations  who  now  meet  each  other  in  the  rough  and 
tumble  of  a  world-wide  mart  but  states  themselves,  each 
representing  its  own  population  and  seeking  to  foster  its 
interests  as  a  zealous  and  faithful  agent.  The  chances  of 
friction  that  are  inherent  in  ordinary  commerce  inhere  today 
in  vast  international  transactions  and  will  increase  in  the 
measure  in  which  the  intercourse  grows.  All  this  means  a 


NOTE    BY   THE   DIRECTOR  Vll 

great  increase  in  incentives  to  warfare,  on  the  one  hand,  and 
in  the  motives  for  preventing  it,  on  the  other.  Private  com- 
merce unites  more  than  it  separates  those  who  participate  in 
it,  and  it  remains  to  be  seen  whether  international  commerce 
will  act  in  the  same  way;  but,  in  view  of  what  modern  war 
means,  the  human  race  will  deserve  to  perish,  and  much  of 
it  will  probably  do  so,  if  the  forces  of  strife  are  allowed  to  get 
the  upper  hand.  Whether  they  will  or  not — whether  the 
recent  economic  changes  will  tend  to  reduce  warfare  or  to 
increase  it — depends  on  the  ability  of  nations  to  create  and 
maintain  the  instrumentalities  that  in  the  new  state  of  the 
world  are  necessary. 

Certain  it  is  that  the  feeling  which  prevails  today,  the 
world  over,  is  not  one  of  security.  The  dread  of  further  war 
is  greater  than  it  was  before  1914.  In  some  areas  war  still 
prevails,  in  others  peace  is  held  by  a  precarious  tenure  and 
in  all  it  can  be  firmly  established  only  by  conscious  and  intel- 
ligent action  by  the  states  themselves.  Mere  exhaustion 
holds  war  dogs  temporarily  in  leash,  but  it  will  take  more 
than  that  to  tame  them  as  they  must  be  tamed  if  peace  is 
to  endure. 

We  here  confront  a  wide  difference  between  the  several 
states  in  comparative  desire  for  peace  and  disposition  to 
maintain  it.  One  portentous  fact  is  the  grim  determination 
of  Russian  communists  to  extend  their  system  by  crude  force 
from  state  to  state.  Bolshevism  is  government  by  the  few  and 
largely  the  bad  masquerading  as  government  for  and  by  the 
people.  In  its  mother  country,  Russia,  the  economic  meas- 
ure by  which  it  began  its  career  was  confiscation  of  private 
wealth — in  itself  an  ultra-democratic  measure.  If  this  had 
brought  in  a  true  communism,  it  would  have  been  a  ruthless 
and  unjust  measure  for  creating  a  peace-loving  state.  A 
just  and  orderly  democratizing  of  industry  in  the  several 
states  would  give  new  strength  to  the  forces  of  peace,  and  it 
would  be  highly  improbable  that  any  state  so  influenced  would 
try  to  extend  its  system  over  foreign  countries  by  military 
invasion.  Democracy,  socialism,  communism  and  bolshe- 
vism  all  appear  in  the  aftermath  of  the  war.  The  first  of 


Vlll  NOTE   BY   THE   DIRECTOR 

• 

them  makes  for  future  peace  and  so  does  even  the  conserva- 
tive element  in  the  second,  while  all  else  in  the  series  means 
certainty  of  civil  strife  and  danger  of  international  war. 

The  fact  that  during  the  war  governments  had  to  take  on 
innumerable  functions  that  were  formerly  in  private  hands 
has  lent  an  impetus  to  socialism  and  to  the  perverted  growths 
that  have  accompanied  it,  and  it  has  created  a  new  inter- 
national system  the  meaning  of  which  is  profoundly  signif- 
icant, though  he  who  runs  can  not  so  easily  read  it.  There 
are  dangerous  features  in  the  system  which  the  war  evoked 
and,  happily  for  mankind,  there  are  available  safeguards 
which  were  evoked  with  them  and  need  to  be  retained  if 
human  effort  can  do  it. 

By  a  compulsion  that  there  was  no  resisting,  the  war  forced 
the  nations  of  the  Entente  into  economic  cooperation  with 
each  other.  Commissions  centering  finally  in  the  Supreme 
Economic  Council  adjusted  in  a  harmonious  way  questions 
that  would  otherwise  have  led  to  rivalry  and  conflicting 
action  in  purchasing  war  materials,  securing  ships,  appor- 
tioning food,  controlling  railroads,  financing  the  war  and 
doing  a  multitude  of  other  things  with  the  one  common  pur- 
pose of  victory.  The  special  compulsion  of  the  struggle  is 
over,  but  it  has  left  an  aftermath  of  issues  grave  enough  to 
make  peace  insecure  unless  something  equivalent  to  the 
Supreme  Economic  Council  survives  in  full  efficiency.  The 
agency  that  did  so  much  to  win  the  war  can  do  so  much  to 
prevent  another  one,  but  to  that  end  it  will  have  to  be  guided 
by  economic  principles  and  it  is  a  saving  fact  that  these  still 
survive.  The  war  has  not  abolished  the  law  of  demand  and 
supply,  though  governments  may  forget  it.  In  the  coming 
era  they  must  build  better  than  they  now  know.  Economic 
knowledge  must  either  go  in  advance  of  action  and  prevent 
disaster  or  follow  action  and  be  learned  from  disaster.  Be- 
yond computation  is  the  importance  of  attaining  the  knowl- 
edge and  using  it  when  evil  impends  and  prevention  is  possible. 

JOHN  BATES  CLARK, 

NEW  YORK,  Director. 

September  27,  1920. 


PREFACE 

The  main  object  of  this  investigation  being  to  examine 
into  the  war  and  armament  loans  of  Japan,  the  historical, 
statistical  and  economic  effects  of  this  subject  are  here  re- 
lated. At  the  same  time,  the  author,  feeling  it  necessary  to 
give  to  foreigners  a  general  conception  of  the  history  of  pub- 
lic finance  and  the  money  market  in  Japan,  has  done  his  best 
to  this  end.  Statements  and  statistics  concerning  public 
finance  and  the  money  market,  therefore,  are  mentioned 
continually  from  the  first  year  of  the  Meiji  Era  to  the  present 
time,  so  as  to  show  the  connection  of  every  fact.  Besides, 
the  author  has  done  his  best  to  make  clear  the  difference 
between  loans  concerning  war  and  armament  and  the  other 
loans. 

As  a  result  of  investigation,  I  find  that  the  war  and  arma- 
ment loans  of  Japan,  which  consist  of  foreign  loans  in  the 
greater  part,  reached  to  a  great  amount,  and  their  economic 
effects  were  very  severe.  First,  with  respect  to  public 
finance,  the  amount  of  loan  expenditures  reached  to  about  a 
quarter  of  the  annual  expenditures  and  consequently  the 
burden  of  taxes  was  greatly  increased.  Secondly,  with  re- 
spect to  the  money  market,  not  only  when  loans  were  raised 
or  redeemed  did  the  rate  of  interest  change  irregularly, 
bringing  panic  in  the  economic  world,  but  the  money  cir- 
culation between  the  central  city  and  local  districts  became 
disproportionate  and  the  evils  of  centralization  of  capital  were 
encouraged.  Thirdly,  in  the  matter  of  foreign  trade,  though 
exports  increased  according  to  the  development  of  industries, 
the  excess  of  imports  increased  so  irregularly  in  consequence 
of  foreign  loans  that  there  were  sometimes  crises  in  the  con- 
version system.  Fourthly,  in  industries,  generally  speaking, 
there  was,  of  course,  rapid  progress;  but  by  the  panics  caused 
by  raising  or  redeeming  of  loans,  the  development  of  indus- 
tries was  prevented  and  especially  manufacture  could  not 

ix 


X  PREFACE 

escape  from  the  condition  of  small  scale  and  infantile  arts. 
Fifthly,  as  to  social  effects,  prices  rose  high  on  account  of  the 
increase  of  currency  and  on  account  of  consumption  taxes, 
and  paupers  and  emigrants  increased  because  saving  was 
impaired,  wages  not  rising  according  to  prices. 

In  the  investigation  of  this  subject,  the  materials  were  col- 
lected chiefly  from  books  and  magazines  already  published,  as 
enumerated  in  the  following  pages.  Moreover,  by  the  good 
will  of  the  officials  of  the  Department  of  Finance  and  the 
Department  of  Home  Affairs,  the  author  obtained  various 
materials  from  the  governmental  documents  which  are  not 
yet  published.  The  manuscript  of  this  volume  at  first 
amounted  to  five  hundred  and  fifty  pages,  but  afterwards  it 
was  abridged  to  three-fifths  of  that  number.  I  regret  that  this 
manuscript  could  not  contain  the  full  materials  which  were 
collected. 

USHISABURO  KOBAYASHI. 

TOKYO,  JAPAN, 
April,  1916. 


BIBLIOGRAPHY 

DEPARTMENT  OF  AGRICULTURE  AND  COMMERCE: 

Effects  of  War  on  the  Wages  of   1904   (Meiji  Sanju  shichin  en 

Chinkin  ni  oyoboseru  Senso  no  Eikyo),  1904. 
Effects  of  War  on  the  Prices  of  1905  (Meiji  Sanju  hachinen  Bukka 

ni  oyoboseru  Senso  no  Eikyo},  1905. 
Effects  of  War  on  Commerce  and  Industries  (Jikyoku  no  Naigai 

Boeki  narabini  Shogyo  ni  oyoboseru  Eikyo},  1906. 
Effects  of  War  in  Osaka  and  Kobe  (Han  Shin  Ryoko  ni  okeru 

Senso  no  Eikyo  Chosa},  1910. 

DEPARTMENT  OF  FINANCE: 

Short  Historical    Record  of  National  Loans   (Kokusai  Enkaku 

Ryaku},  1889. 
Report  on  the  Redemption  of  Paper  Money  in  Japan  (Shihei 

Seiri  Shimatsu),  1890. 
Report  made  by  the  Coinage  System  Investigation  Society  (Kahei 

Seido  Chosakai  hokoku},  1890. 

• 

Report  on  the  Reserve  Fund  in  Japan  (Junbikin  Shimatsu},  1890. 

Investigation  regarding  Repayment  and  Consolidation  of  Na- 
tional Debt  {Kokusai  Shokan  narabini  Seiri  ni  Kansuru  Chosa}, 
1892. 

Relation  between  Loans  and  Taxes  in  Defraying  War  Expendi- 
tures (Gunpi  Shiben  jo  Kosai  to  Sozei  to  no  Kankei},  1893. 

Annual  Report  of  Financial  Matters  (Zaisei  Jiko  Isan},  1893-1907. 

Reference  Book  for  Monetary  Circulation  (Kinyil  Jijyo  San- 
kosho},  1893-1907. 

Report  on  the  Special  Account  of  Extraordinary  Military  Expend- 
itures for  the  War  of  1894-1895  (Meiji  Niju  shichi  hachinen  eki 
Rinji  Gunjihi  Tokubetsu  Kaikei  Shimatsu},  1897. 

General  Account  on  Reform  of  Coinage  System  in  1897  (Meiji 
Sanjunen  Heisei  Kaikaku  Shimatsu  Gaiyo},  1899. 

Report  on  the  Postbellum  Financial  Administration  (Sengo 
Zaisei  Shimatsu  hokoku},  1900. 

xi 


Xll  BIBLIOGRAPHY 

Tokyo  Bankers  Association:     Finance  and  Economics  during  the 

War  (Senji  Zaisei  Keizai},  1904. 
Report  on  Financial  Administration  during  the  War  of  1904-1905 

(Meiji  Sanju  shichi  hachinen  eki  Senji  Zaisei  Shimatsusho) , 

2  vols.,  1905  and  1910. 
Report  on  Receipts  and  Disbursements  of  Extraordinary  Military 

Expenditures  for  the  War  of  1904-1905  (Meiji  Sanju  shichi 

hachinen  eki  Rinji  Gunjihi  Shushi  Gaikyo  hokoku},  1906. 
Report  on  the  Extraordinary  War  Expenditures  (Rinji  Gunjihi 

Shimatsu),  i  vol.,  1907. 
Investigation  concerning  Military  Bills  (Gunyo  Kitle  ni  Kansuru 

Chosa},  1908. 
Annual  Report  of  Finance  and   Economics  in  Japan   (Nippon 

Zaisei  oyobi  Keizai  Nenpo),  1910-1911. 
Table  showing  the  Sum  of  National  Loans  of  Japan  (Kokusai  Gaku 

Meisai  hyo),  1911. 
Effects  of  War  on  the  Money  Market  (Kinyu  Shijo  ni  oyoboseru 

Senji  no  Eikyo),  1911. 
Annual  Statistics  of  National  Loans  (Kokusai  Tokei  Nenpo). 

DEPARTMENT  OF  HOME  AFFAIRS: 

Central  and  Local  Impositions  during  the  War  (Senji  ni  okeru 

Child  oyobi  Chiho  Koka},  1909. 

Statistics  of  Communal  Debt  of  Japan  (Chihosai  Tokei},  1913. 
Annual  Report  of  Communal  Finance  of  Japan  (Chiho  Zaisei 

Gairan} . 

HOSOKAWA,  YujiRO,  General  Account  of  Financial  Administration 
in  Japan  (Nippon  Zaisei  Soran},  2  vols.,  1892. 

SAKATANI,  Y.  (representing  the  authors),  History  of  Financial 
Administration  in  the  Meiji  Era  (Meiji  Zaiseishi),  15  vols., 
1904-1905. 

STATISTICS  BUREAU,  Imperial  Statistical  Year  Book  (Teikoku 
Tokei  Nenkan}. 


EXPLANATORY  TABLES 

VALUE  OF  JAPANESE  CURRENCIES 

Japan  adopted  the  gold  standard  system  in  1871,  but  the  inconvertible  paper 
money  became  principal  currency  a  few  years  later.  In  1886  the  paper  money 
became  convertible  into  silver  and  after  that  date  the  Japanese  currency  system 
was  the  silver  standard  de  facto,  until  on  October  I,  1897,  the  gold  standard  system 
was  legally  adopted.  The  figures  necessary  to  ascertain  the  value  of  Japanese 
currencies  are  given  below : 

(1)  I  gold  yen  (according  to  Coinage  Law  of  1871)  contains  1.5  gramme  pure  gold. 

(2)  I  gold  yen  (according  to  Coinage  Law  of  1897)  contains  0.75  gramme  pure  gold. 

(3)  I  silver  yen  contains  24.261  gramme  pure  silver. 

(4)  The  value  of  I  silver  yen  in  the  English  currency  (according  to  the  demand 

rate  of  exchange  on  London  in  the  average  of  the  year)  is  as  follows: 


s.  d. 

1874 4.02.0 

1875 4.00.8 

1876. 
1877- 


3.11.2 
•••     3-H-7 

1878 3-°9-4 

1879 3.08.0 

1880 3.08.9 

1881 3.08.4 


s.     d. 

1882 3.08.8 

1883 3-07-9 

1884 

1885 

1886 

1887 

1888. . 


1889. 


3  07.9 
3.06.0 

3  03-2 
3.02.0 
3.01.0 
3-01. i 


1890. 
1891. 
1892. 

1893- 
1894. 

I895- 
1896. 
1897. 


s.     d. 
3-04-5 

2.02.6 
2.10.5 
2.O6.7 
2.OI.2 
2.01-3 
2.02.0 
2.OO.4 


(5)  The  value  of  I  yen  of  paper  money  in  the  English  currency  (calculated  on  the 

basis  of  the  above  mentioned  exchange  rate  and  the  quotations  of  the  silver 
price  in  the  Tokyo  Exchange  in  the  average  of  the  year)  is  as  follows: 

s.     d.  s.     d.  s.     d. 

1877 3  10.  i  1880 2.06.4  l883 2.10.7 

1878 3.05.6  1881 2.02.1  1884 3-04.3 

1879 3-°°  3  l882 2.04.5  1885 3-03-7 

(6)  I  ryo  (unit  of  value  of  the  old  currency  system)  was  declared  in  the  Coinage 

Law  0^1871  to  be  equal  to  I  yen. 


CHRONOLOGICAL  TABLE 


Meiji     ist 
2d 

3d 

4th 

5th 

6th 

7th 

8th 

9th 

loth 

nth 

1 2th 

I3th 

1 4th 


1868  A.  D. 

1869 

1870 

1871 

1872 

1874 
1875 
1876 
1877 
1878 
1879 
1880 
1881 


Meiji  1 5th 
1 6th 
1 7th 
1 8th 
1 9th 

20th 
2ISt 
22d 

23d 
24th 
25th 
26th 
27th 
28th 


1882  A. 

1883 

1884 

1885 

1886 

1887 

1888 

1889 

1890 

1891 

1892 


D. 


1894 
IS95 


xin 


XIV 


EXPLANATORY  TABLES 


CHRONOLOGICAL  TABLE — (Continued) 


Meiji29th 
30th 
3ist 
32d 
33d 
34th 
35th 
36th 
37th 
38th 
39th 
40th 


1896  A. 

1897 

1898 

1899 

1900 

1901 

1902 

1903 

1904 

1905 
1906 
1907 


D. 


Meiji  4ist 
42d 

43d 
44th 
45th  "I 

Taisho  ist  / 
2d 

3d 
4th 
5th 
6th 


1908  A.  D. 
1909 
1910 
1911 

1912  " 

1913  " 
1914 

1915 
1916 
1917  " 


WEIGHTS,  MEASURES  AND  MONEY 
With  English,  American,  French  and  German  Equivalents 


Japan 
to' =36  Cho 
=  2,160  Ken 
=  12,960  Shaku. 


Great 
Britain 

f  2 . 44030 

I  Miles 
/ 


U.  S.  of 
America 

2.44029 

Miles 


France          Germany 


Miles 


Ri  (Marine) 

Square*,' {  g$g£ . 


Cho  =  iq  Tan 
=  iooSe 
=  3,000  Bu. . .  . 


2.45064 
Acres 


Miles 

5  95501 
Sq.  Miles 


2.45062 
Acres 


3  -92727 
Kiloms. 

i .85318 
Kiloms. 


3 .92727 
Kiloms. 

1.85318 
Kiloms. 


15.42347         15.42347 
Km.  Carres    Quadrat  Km. 


Tsubo=ioGo  /  3 -95369         3.95367 

=  100 Shaku..  .  .  \  Sq.  Yards      Sq.  Yards 


Koku=ioTo 
=  looSho 
1,000  Go 


!  4-96005 
'I  Bushels 


=  10,000  Shaku. .  [ 


Gallons  (Liq.) 
5 • i 1902 
Bushels  (Dry) 


Koku      (Capacity      offi/ioof  i/io  of 

ship) \  one  Ton        one  Ton 


99-17355 
Ares 


3  30579 
Centiares. 

1.80391 
Hectolitres 


I/IO 

de  Tonne 

3.75000 


*-: !«r  I f*fe ?*&«*•>   ™™ 

=  100,000  Rin. . 


10.04711 


Kin=  1 60  Momme. . 


yen  —  looSen 
=  i  ,000  Rin 
=  10,000  Mo. . 


10.04711 

Ibs.  (Troy)  Ibs.  (Troy) 

1.32277    1.32277 
Ibs.  (Avoir.)  Ibs.  (Avoir.) 
1.60754    1-60754 
( Ibs.  (Troy)  Ibs.  (Troy) 


2.0.582 
s.  d. 


o . 4984 
Dollar 


0.60000 
Kilogs. 


2.583 
Francs 


99-17355 
Ar. 


3-30579 
Quadratm. 

1.80391 
Hectolitres 


I/IO 

Tonne 

3  75000 
Kilogs. 


0.60000 
Kilogs. 


2  .0924 

Marks 


CONTENTS 


PART  I — HISTORICAL  SURVEY  OF  PUBLIC  LOANS  FOR  WAR 

AND  ARMAMENT 

CHAPTER  PAGE 

I     Introduction 3 

II     From   the    Meiji    Restoration   to    the    Satsuma 

Rebellion 5 

III     From  the  Satsuma  Rebellion  to  the  Sino-Japanese 

War 27 

IV  From   the    Sino-Japanese    War    to    the    Russo- 

Japanese  War 40 

V  From  the   Russo-Japanese  War  to  the   Present 

Day 61 

VI     Present  Amount  of  Public  Loans 87 

VII     Conclusion 100 

PART  II — ECONOMIC  EFFECTS  OF  PUBLIC  LOANS  FOR  WAR 

AND  ARMAMENT 

I     Introduction 107 

II     Effects  on  Public  Finance 108 

III  Effects  on  the  Money  Market 145 

IV  Effects  on  Industries 193 

V     Social  Effects ; 201 

VI     Conclusion 214 

• 

INDEX 217 


XV 


PART  I 

HISTORICAL  SURVEY  OF  PUBLIC 

LOANS  FOR  WAR  AND 

ARMAMENT 


CHAPTER  I 
INTRODUCTION 

According  to  their  history,  and  the  aims  for  which  they  were 
raised,  the  public  loans  of  Japan  are  usually  divided  into  the 
following : 

(1)  Public  loans  for  the  reform  of  political  institutions. 

(2)  Public  loans  for  war  and  armament. 

(3)  Public  loans  for  the  encouragement  of  domestic  indus- 
tries. 

(4)  Public  loans  for  the  adjustment  of  finance. 

(5)  Public  loans  for  the  government  of  new  territories. 
The  above  are  all  funded,  or  at  least  quasi-funded  loans, 

and  we  ought  to  add  to  these  another: 

(6)  Floating  loans. 

The  main  subject  of  the  present  investigation  consists  of 
the  history  and  statistics  of  funded  and  floating  loans  for 
war  and  armament.  The  extent  of  this  class  of  public  loans 
can  not  be  exactly  defined.  First,  loans  for  the  reform  of 
political  institutions  are  so  closely  intermingled  with  this  kind 
of  public  loans  that  it  is  next  to  impossible  to  draw  a  clear 
line  between  these  loans  and  those  which  form  the  subject  of 
this  treatise.  Public  loans  for  the  reform  of  political  institu- 
tions were  loans  in  connection  with  the  work  of  the  Meiji 
Restoration,  and  the  object  of  their  flotation  lay  in  defraying 
the  expenses  of  the  reorganization  of  old  clans,  and  measures 
taken  with  regard  to  it.  The  reform,  however,  gave  rise  to 
several  internal  calamities,  which  naturally  demanded  ex- 
penditure on  conquest,  pacification  or  repression,  and  sub- 
sequently on  the  postbellum  relief  work.  Secondly,  loans  for 
financial  adjustment  were  loans  with  respect  to  the  redemp- 
tion and  adjustment  of  old  debts.  In  those  cases  in  which  the 
old  debts  had  been  contracted  in  connection  with  war  and 
armament,  the  corresponding  new  loans  would  in  theory 

3 


4  WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 

belong  to  the  category  of  war  and  armament  loans.  But  as 
a  matter  of  fact,  these  kinds  of  new  debt  were  floated  in  the 
same  form  as  other  kinds  of  old  loans,  and  included  in  the 
so-called  financial  adjustment  loans.  Thirdly,  loans  for  the 
encouragement  of  home  industries  included  some  items  which, 
in  fact,  belong  to  war  and  armament  loans.  For  example,  a 
loan,  issued  with  the  name  of  the  Government  Undertaking 
Loan  ("Jigyo  Kosai"),  was  one  which  aimed  at  national 
defense.  It  is  difficult  to  distinguish  them  accurately  and  to 
know  their  exact  figures  in  each  year.  The  above  three  are 
mere  instances  of  intermingling,  and  there  are  many  other 
such  cases.  Lastly,  floating  loans  were  mostly  issued  for  the 
express  purposes  of  war  and  armament,  but  cases  are  not 
wanting  in  which  they  were  included  in  the  loans  for  replen- 
ishing the  deficit  of  the  general  account.  In  such  cases  the 
setting  apart  of  war  and  armament  loans  is  quite  out  of  the 
question. 

Such  being  the  case,  the  extent  of  war  and  armament  loans 
is  by  no  means  clear  and  well  defined.  The  present  investiga- 
tion chiefly  concerns  itself  with  war  and  armament  loans 
which  are  expressly  so  indicated.  In  case,  however,  there 
exist  other  loans  closely  connected  with  war  and  armament 
loans,  we  intend  to  endeavor  to  clarify  their  mutual  connec- 
tion that  we  may  ascertain  the  actual  instead  of  merely 
nominal  war  and  armament  loans. 


CHAPTER  II 

FROM  THE  MEIJI   RESTORATION  TO  THE 
SATSUMA  REBELLION 

The  Meiji  Restoration  was  accomplished  by  the  reestab- 
lishment  of  order  and  the  abolition  of  old  clans.  When,  in 
1867,  the  Tokugawa  Shogunate  had  transferred  the  reins  of 
government  to  the  Emperor,  the  regular  monarchial  govern- 
ment may  be  said  to  have  been  nominally  restored.  But  the 
whole  country  was  still  in  an  uproar,  for  not  only  did  the 
great  clans  which  had  engaged  in  the  crushing  of  the  Shogun- 
ate not  lay  down  their  arms,  but  the  pro-Shogunate  clans 
were  determined  on  restoring  the  reign  of  the  Shogun.  In 
January,  1868,  battles  were  fought  at  Toba  and  Fushimi.  In 
May  battles  of  Uyeno  (in  Yedo)  took  place.  In  September 
the  name  of  the  reign  was  called  Meiji.  In  October  the 
Imperial  palace  was  removed  to  Tokyo,  and  with  it  the  Dajo- 
kwan  and  other  government  offices.  In  June  an  Imperial 
decree  was  issued  to  the  effect  that  the  "Daimyo,"  or  feudal 
lords,  should  transfer  the  power  of  clan  administration  to 
the  central  government.  Battles  took  place,  however,  suc- 
cessively at  Aizu  (end  of  September)  and  Hakodate  (October) , 
and  it  was  not  before  the  end  of  May  of  the  next  year  that 
they  were  brought  entirely  to  a  termination.  This  ended 
what  is  generally  known  as  the  War  of  Restoration  ("Ishin- 
eki").  On  September  I,  1870,  the  system  of  clan  govern- 
ment by  the  central  administration  was  put  in  operation.  In 
July,  1871,  a  decree  was  issued  for  the  abolishment  of  clans 
and  the  establishment  of  prefectures,  thus  effecting  the  work- 
ing of  centralized  administration,  nominally  as  well  as  really. 
But  the  peace  of  the  Empire  was  not  yet  wholly  restored. 
There  were  many  local  disturbances  in  Ise,  Shinano,  Mim- 
asaka,  Oita,  Miye,  Miyazaki,  Takasaki,  Sanuki,  Yamagata 
and  Saga.  Moreover,  the  conquest  of  Formosa,  beginning  in 

5 


WAR  AND  ARMAMENT   LOANS:   HISTORICAL   SURVEY 


April,  1874,  and  the  Korean  affair  of  the  following  year,  1875, 
may  be  numbered  among  the  many  disturbances  attendant 
upon  the  Restoration. 

The  above  is  a  brief  summary  of  the  wars  and  disturbances 
in  connection  with  the  Restoration,  and  the  expenditure  on 
these  was  14,188,308  yen  in  all.  The  following  list  will  show 
its  details: 

EXPENDITURES  OF  THE  WARS  CONNECTED  WITH  THE  RESTORATION1 


Fiscal  Period 

War  of 
Restora- 
tion 

Pacifica- 
tion of 
Local  Dis- 
turbances 

Conquest 
of 
Formosa 

Korean 
Affair 

Total 

I.     Dec.,       i867-Dec., 
1868  

Yen 
4,621,6'*'* 

Yen 

Yen 

Yen 

Yen 
4.621.6^ 

II.  Jan.,      i869-Sept., 
1869  

2,  625,644 

2,625,644 

III.  Oct.,     1869-Sept., 
1870  

I,546,Q84 

1,546.084 

IV.  Oct.,     i869-Sept., 
1871  . 

II4.O72 

II4..O72 

V.  Oct.,        i87i-Dec., 
1872  

•*.6^7 

^.6*7 

VI.  Jan.,      i875-Dec., 
1875  

82,404 

82,4O4 

VII.  Jan.,    i874-Dec., 
1874  

Q09.5O2 

2,2^0,1,76 

•?,22Q.878 

VIII.  Jan.,  i875-June, 
1875  

86,821 

1,^87,68'? 

I.474.5O4 

July,  i875-June,  1876. 

489,552 

489,552 

Total  

8  Qo8.  m 

I  172  ^64 

3  618  059 

4.8Q  552 

14,188,308 

The  sources  of  revenue  for  covering  these  expenses  were 
manifold.  The  expenditures  with  regard  to  the  War  of  the 
Restoration  were  chiefly  met  by  1,991,670  yen,  which  was 
levied  on  the  clans,  and  by  452,964  yen,  which  was  the  contri- 
bution on  the  part  of  the  people.  The  deficit  was  replenished 
by  borrowed  money,  and  the  issue  of  Dajokwan  notes.  The 
expenditures  for  the  pacification  of  local  disturbances  were 
met  by  802,686  yen  levy  on  the  clans  and  277,530  yen  con- 
tribution on  the  part  of  the  people.  A  little  deficit  was 

1  Based  on  Imperial  Statistical  Year  Book,  and  Financial  History  of  the  Meiji 
Era. 


MEIJI   RESTORATION   TO   SATSUMA   REBELLION  7 

covered  by  the  issue  of  new  paper  money.  General  revenue 
was  appropriated  to  the  expenses  of  the  Formosan  conquest 
and  the  Korean  affair,  but  since  the  general  revenue  included, 
as  an  extraordinary  item,  the  issue  of  a  great  amount  of  paper 
money,  these  expenses  may  properly  be  said  to  have  been  met 
by  the  issue  of  paper  money. 

The  following  table  shows  the  total  amount,  in  yen,  of  the 
financial  resources  with  respect  to  the  War  of  the  Restoration : 

Levies  on  the  clans T 2,794,356 

Money  borrowed  from  the  rich 10,426,382 

Contributions 730,494 

Paper  money  and  general  revenue 237,076 

Total 14,188,308 

The  above  figures  apparently  show  that  the  need  for  paper 
money  issue  was  insignificant,  even  if  we  add  the  paper  money 
for  the  repayment  of  borrowed  money.  As  a  matter  of  fact, 
however,  the  issue  could  not  remain  at  such  modest  figures. 
In  the  general  account  of  the  year  1868  (the  first  period),  of 
the  total  revenue  (33,090,000  yen),  the  amount  of  ordinary 
revenue  was  only  10  per  cent,  amounting  to  3,660,000  yen, 
while  the  extraordinary  revenue  occupied  90  per  cent,  amount- 
ing to  29,420,000  yen.  As  of  this  extraordinary  revenue  the 
issue  of  the  "  Dajokwansatsu"  showed  24,037,390  yen,  it  must 
be  said  that  70  per  cent  of  the  total  revenue  was  raised  by  the 
issue  of  paper  money.  In  1867  (the  second  period),  of  the 
total  revenue,  amounting  to  34,430,000  yen,  the  ordinary 
revenue  was  only  4,660,000  yen,  while  the  extraordinary 
revenue  showed  29,770,000  yen,  which  included  the  issue  of 
paper  money  amounting  to  23,963,610  yen,  i.e.,  70  per  cent  of 
the  total  amount.  This  phenomenon  took  place,  first  be- 
cause the  government  was  deprived  of  the  revenues  in  the 
districts  afflicted  by  disturbances,  and  secondly  because  the 
government  was  in  need  of  a  big  sum  of  money  for  defraying 
army  and  navy  expenditures,  garrison  expenditure,  warship 
expenditure  and  war  relief  funds  for  different  clans,  aside  from 
the  warfare  expenditure  in  the  strict  sense.  In  the  third  and 
fourth  periods  the  expenditures  showed  a  remarkable  decrease, 


8  WAR  AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 

and  the  corresponding  total  of  the  annual  revenue  also  fell  off. 
The  revenues  from  the  districts  increased,  which  brought 
about  an  increased  receipt  in  the  ordinary  revenue,1  and 
minimized  the  necessity  of  paper  money.  In  the  fifth  period, 
however,  as  there  were  various  outlays  for  the  expansion  of 
military  and  naval  armament,  for  the  purchase  of  warships, 
for  the  construction  of  ships  and  shipyards,  for  the  enforce- 
ment of  the  conscription  system,  and  for  the  suppression  of 
local  disturbances,  the  total  expenditures  amounted  to  double 
those  of  the  preceding  period,  and  the  corresponding  revenue 
had  to  be  increased  to  50,440,000  yen.  Of  this  revenue,  the 
issue  of  New  Paper  Money  amounted  to  17,820,000  yen,  viz., 
34  per  cent  of  the  total  sum.  Thus  the  paper  money  issued 
up  to  the  fifth  period  were  "  Dajokwansatsu,"  Mimbushosatsu 
and  New  Paper  Money,  which  attained  the  aggregate  sum  of 
73>325>439  yen-  The  majority  of  this  paper  money  partook 
of  the  nature  of  loans  on  account  of  the  War  of  the  Resto- 
ration, local  disturbances,  or  on  account  of  the  relief  expendi- 
tures, and  military  and  naval  armament.  After  the  sixth 
period  there  were  local  disturbances  on  the  one  hand,  and  the 
Formosan  and  Korean  affairs  on  the  other,  both  of  which  in- 
volved no  small  amount  of  expenditures,  and  also  demanded 
the  increase  of  armament.  It  seems  that  New  Paper  Money 
was  issued  to  comply  with  these  needs.  Thus,  the  ordinary 
and  extraordinary  armament  outlays  from  the  first  period  until 
the  fiscal  year  1876  showed  53,454,154  yen  in  military  arma- 
ment expenditures,  and  14,770,331  yen  in  naval  armament 
expenditures,  totalling  68,524,465  yen.  The  New  Paper 
Money,  which  had  been  primarily  issued  for  the  exchange  of 
old  government  paper  money,  came  to  be  issued  for  the  sake 
of  covering  these  enormous  outlays.2  Afterward  Kinsatsu 
Exchange  Loans  were  issued  to  withdraw  these  paper  moneys. 
When  the  local  disturbances  were  nearly  suppressed,  the 
government  set  about  the  financial  adjustment  attending  the 

1  5.354.512  yen,  *•*••  25  I561"  cent  of  the  total  revenue,  and  2,145,487  yen,  nearly 
IO  per  cent  of  the  total  revenue. 
3  100,000,000  yen  in  round  numbers  at  the  end  of  the  fiscal  year  1876. 


MEIJI   RESTORATION   TO   SATSUMA   REBELLION  9 

abolition  of  old  clans.  The  first  task  lay  in  the  succession  to 
and  adjustment  of  old  clan  loans.  The  second  was  the  dis- 
posal of  old  clan  paper  money.  The  third  was  the  adjust- 
ment of  the  hereditary  pension  system.  In  the  first  place, 
the  government  divided  the  old  clan  loans,  of  a  public  nature, 
into  "old  loans  issued  before  1867,"  and  "new  loans  issued 
from  1868  to  1872."  In  exchange  for  the  old  loans,  the  so- 
called  Old  Public  Loan  (amounting  to  10,972,725  yen),  bearing 
no  interest,  was  delivered,  while  the  so-called  4  per  cent  New 
Public  Loan  (amounting  to  12,422,825  yen)  was  delivered  in 
exchange  for  the  new  loans.  This  adjustment  was  made  by 
the  issue  of  the  regulations  concerning  the  issue  of  New  and 
Old  Public  Loan  Bonds.  Of  the  above  two  bonds,  the  New 
Public  Loan  may  be  properly  regarded  as  a  loan  for  the  pur- 
pose of  adjustment  of  the  debts  contracted  on  account  of  war 
and  armament  by  the  old  clans.  In  the  second  place,  the 
withdrawal  of  the  Old  Paper  Money  was  accomplished  by  the 
issue  of  New  Paper  Money  after  February,  1872  (22,908,434 
yen),  and  by  an  outlay  of  the  Clan  Paper  Money  Reserve 
Fund  (888,741  yen).  We  shall  not  be  far  mistaken,  if  we 
presume  that  the  Old  Clan  Paper  Money  was  issued  on 
account  of  the  disturbances  before  or  after  the  Restoration. 
Lastly,  the  abolishment  of  the  hereditary  pension  system  was 
accomplished  by  the  delivery  of  7  per  cent  sterling  loan  bonds, 
floated  in  London,  amounting  to  £2,400,000  (11,712,000  yen), 
8  per  cent  Voluntarily-Capitalized  Pension  Bonds  (16,565,850 
yen),  issued  in  accordance  with  the  regulations  concerning 
the  issue  of  Voluntarily-Capitalized  Pension  Exchange  Bonds, 
and  of  Hereditary  Pension  Bonds  (173,902,900  yen),  with 
interest  ranging  from  10  per  cent  to  5  per  cent,  issued  in 
accordance  with  the  regulations  concerning  the  issue  of  Hered- 
itary Pension  Bonds.  Inasmuch  as  the  hereditary  pensions 
of  the  old  clans  had  been  considered  as  pay  to  the  feudal 
vassals,  and  corresponded  to  armament  expenditure,  and 
inasmuch  as  the  Hereditary  Pension  Bonds  were  also  issued 
for  the  abolishment  of  the  pensions  awarded  to  those  who  had 
rendered  services  in  the  cause  of  the  Restoration,  the  Heredi- 


IO        WAR   AND   ARMAMENT   LOANS  I   HISTORICAL   SURVEY 

tary  Pension  Bonds  may  well  be  regarded  as  loans  for  war  and 
armament.  In  short,  Old  and  New  Public  Loans,  7  per  cent 
Foreign  Loan,  Voluntarily-Capitalized  Pension  Bonds,  and 
Hereditary  Pension  Bonds  may,  in  a  certain  sense,  be  classed 
as  war  and  armament  loans.  As  the  chief  object  of  their 
issue  consisted  in  the  reform  of  institutions,  we  exclude  these 
loans  from  the  present  investigation.  The  reader,  however, 
must  keep  it  in  mind  that,  since  these  loans  had  a  great  deal 
to  do  with  war  and  armament,  they  may  well  be  termed 
quasi-war  and  armament  loans. 

If  we  exclude  from  our  investigation  the  loans  for  the  reform 
of  public  institutions  (the  establishment  of  the  Restoration), 
the  war  and  armament  loans  which  form  the  subject  of  our 
research  are  various  government  paper  moneys,  and  "Kin- 
satsu"  Exchange  Bonds.  The  government  paper  moneys  in- 
clude "Dajokwansatsu,"  "Mimbushosatsu"  and  New  Paper 
Money.  The  history  and  statistics  of  these  several  loans  will 
be  discussed  in  the  following  sections. 

"  DAJOKWANSATSU  " 

The  "Dajokwansatsu"  was  a  kind  of  paper  money  issued 
from  the  "Dajokwan"  in  the  beginning  of  1868.  The  issues 
of  these  government  notes  were  entered  in  the  extraordinary 
receipt  items  of  the  annual  account,  all  their  disbursements 
going  through  the  national  Treasury.  While  a  portion  of 
them  was  disbursed  as  advances  to  the  old  clans  as  a  substi- 
tute for  currency,  the  greatest  part  took  the  form  of  floating 
public  loans  for  meeting  the  requirements  of  the  civil  war 
finances.  Inasmuch  as  these  notes  failed  to  be  converted 
into  new  coins  in  1869  according  to  the  public  promise  which 
had  been  made  to  that  effect,  this  is  properly  to  be  looked 
upon  as  a  sort  of  compulsory  war  loan. 

At  the  dawn  of  the  Restoration,  the  pressure  of  military 
affairs,  together  with  the  decay  of  all  things,  helped  to  increase 
in  no  small  degree  the  expenditures  for  domestic  administra- 
tion and  military  affairs,  while  the  annual  revenue  was  not 
sufficient  to  cover  them.  As  a  temporary  measure,  therefore, 


MEIJI    RESTORATION   TO    SATSUMA   REBELLION  II 

the  authorities  resorted  to  the  issue  of  paper  money  to  replen- 
ish the  scanty  national  Treasury  on  the  one  hand,  and  to 
supply  domestic  productive  enterprises  with  necessary  funds 
on  the  other.  It  was  under  these  circumstances  that  the 
"Dajokwansatsu"  was  issued  in  1872.  The  notification  read 
as  follows: 

(1)  With  a  view  to  relieving  the  general  suffering,  the  "  Dajokwansatsu  "  shall 
be  issued,  and  its  circulation  shall  be  limited  to  the  period  of  thirteen  years. 

(2)  A  loan  shall  be  granted  to  the  clans  in  proportion  to  their  respective  rev- 
enues, the  ratio  being  10,000  yen  per  10,000  koku  (49,629  bushels)  and  the  full 
repayment  must  be  made  in  thirteen  years,  redeeming  annually  10  per  cent  of  the 
loan  with  the  "Dajokwansatsu." 

(3)  A  loan  shall  be  granted  to  farmers  and  merchants  in  proportion  to  their 
respective  earnings,  regard  being  had  to  the  Registry  of  Social  Rank  ("Mimoto 
Gembo").     A  reasonable  percentage  of  both  principal  and  interest  must  annually 
be  repaid. 

(4)  Conversion  shall  not  be  allowed,  since  the  repayment  itself  is  to  be  made 
with  "Dajokwansatsu." 

Apparently,  therefore,  the  object  of  issuing  this  note  was 
to  grant  loans  to  the  clans,  farmers  and  merchants,  in  order 
to  relieve  the  public  distress.  As  a  matter  of  fact,  however, 
its  aim  lay  rather  in  replenishing  the  scanty  Treasury  caused 
by  frequent  civil  wars.  The  correctness  of  this  inference  is 
supported  by  various  ordinances,  notifications  and  reports  of 
the  government  issued  in  this  connection,  which  show  that 
this  government  note  was  employed  for  purposes  of  suppres- 
sion of  disturbances,  for  armament  schemes  and  for  miscel- 
laneous expenses.  Moreover,  it  was  left  in  circulation,  with- 
out the  government  taking  any  steps  to  redeem  it. 

The  people  at  that  time  were  unaccustomed  to  the  use  of 
paper  money  and  they  refused  its  acceptance.  This  led  to 
the  growing  up  of  some  difference  in  value  between  metallic 
and  paper  money,  which  naturally  made  the  circulation  of  the 
latter  more  difficult.  The  government  was  often  obliged  to 
publish  official  notices  strictly  forbidding  any  act  meant  to 
obstruct  its  circulation,  and  to  give  instructions  to  all  the 
clans  and  prefectures  to  unite  their  efforts  in  acquainting  the 
people  with  the  true  intent  of  the  ordinance.  All  these  steps 


12         WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 

on  the  part  of  the  government,  however,  only  helped  to  injure 
the  credit  of  the  government,  and  to  impress  upon  the  minds 
of  the  people  the  undesirability  of  the  acceptance  of  paper 
money.  Thereupon,  the  government  issued  a  notification  in 
May,  1869,  providing  the  limit  of  its  issue,  with  the  promise 
to  convert  it  into  new  coins  by  1872  and  to  allow  6  per  cent 
interest  on  any  paper  money  unredeemed  after  the  expiration 
of  the  term.  As  a  result,  the  credit  of  the  paper  money  grad- 
ually rose,  and  promised  a  fair  prospect  for  its  circulation; 
but  the  breach  of  the  promise  on  the  part  of  the  government 
was  soon  succeeded  by  declining  credit. 

According  to  the  notification,  the  manufacture  of  paper 
money  was  to  be  limited  to  the  total  of  32,500,000  yen.  Of 
this  sum,  13,000,000  yen  in  round  numbers  had  been  granted 
as  loans  to  the  clans  and  urban  prefectures  "fu,"  14,000,000 
yen  in  round  numbers  had  been  disbursed  to  cover  govern- 
ment expenditures,  and  the  remaining  sum  of  about  5,000,000 
yen  was  to  be  appropriated  for  government  expenditure  till 
the  receipt  of  the  revenue  for  the  current  fiscal  year.  No  more 
issues  were  to  be  allowed,  and  the  printing  machines  were 
then  to  be  destroyed. 

The  government  being  unable  to  observe  the  limit,  the 
"Dajokwansatsu"  was  actually  issued  to  the  amount  of 
48,000,000  yen  during  the  period  extending  from  April,  1868, 
to  July,  1869,  thus  overriding  the  limit  by  about  15,500,000 
yen.  Moreover,  the  public  promise  to  convert  the  "Dajok- 
wansatsu"  into  new  coins  was  not  carried  into  execution, — 
on  the  contrary  a  new  paper  money  called  "  Mimbushosatsu  " 
was  used  to  redeem  the  "  Dajokwansatsu."  This  scheme  also 
resulted  in  failure,  and  both  of  these  paper  moneys  were  in 
parallel  circulation. 

' '  MIMBUSHOSATSU  ' ' 

The  "Mimbushosatsu"  was  a  minor  paper  money  which 
began  to  be  issued  from  the  Commercial  Bureau  of  the  "  Mim- 
busho"  from  September,  1869,  as  an  extraordinary  source  of 
revenue  in  the  general  account. 


MEIJI    RESTORATION    TO    SATSUMA   REBELLION  13 

The  "Dajokwansatsu"1  consisted  of  five  kinds  of  paper 
money  of  varying  face  value.  The  notes  chiefly  issued,  how- 
ever, were  major  paper  moneys,  especially  ten  yen  notes. 
The  issue  of  minor  paper  moneys,  such  as  twenty-five  sen 
notes  and  6.25  sen  notes  was  so  insufficient  that  these  were 
inadequate  to  meet  the  needs  of  distant  and  remote  districts. 
In  addition  to  this,  the  copper  coins  became  so  scarce  among 
the  people  that  small  transactions  could  not  be  carried  on  with 
ease  and  smoothness.  It  was  with  the  object  of  affording 
more  facilities  for  these  petty  transactions  on  one  hand,  and 
of  replacing  major  paper  money  then  in  circulation,  that  the 
government  decided  to  make  the  Commercial  Bureau  issue 
"Mimbushosatsu."  This  paper  money  was  issued  in  accord- 
ance with  a  notification  of  1869,  and  consisted  of  minor  paper 
money  of  the  following  units,  i.e.,  50,  25,  12.5,  and  6.25  sen, 
respectively.  The  date  of  conversion  was  to  be  announced  at 
a  later  time  by  the  same  department. 

Thus  as  one  object  of  this  issue  was  to  replace  major  "  Dajo- 
kwansatsu,"  the  issue  of  "Mimbushosatsu"  should  have  been 
followed  by  the  withdrawal  and  cancellation  of  "Dajokwan- 
satsu." But  pressed  by  the  deficiencies  of  the  Treasury 
during  war  time,  this  purpose  was  utterly  disregarded.  Not 
only  were  the  "Mimbushosatsu"  issued  irrespective  of  the 
other,  but  the  "  Dajokwansatsu,"  which  had  been  withdrawn, 
were  again  put  in  circulation.  As  a  matter  of  fact,  therefore, 
a  new  paper  money  was  added  to  the  "Dajokwansatsu," 
which  had  already  surpassed  the  limit.  "Mimbushosatsu" 
totalled  7,500,000  yen  between  October,  1869,  and  October, 
1870. 

1  Besides  the  "Dajokwansatsu  and  the  "Mimbushosatsu,"  two  other  govern- 
ment paper  moneys  were  issued,  viz.,  the  Exchequer  Exchange  Bonds  and  Colo- 
nial Exchange  Bonds.  The  former  bonds  were  issued  by  a  notification  of  October, 
1871,  and  amounted  to  6,800,000  yen.  The  latter  bonds  were  issued  by  the  written 
agreement  made  by  the  colonial  governor  during  the  period  between  January  and 
April,  1872,  and  amounted  to  2,500,000  yen.  Both  of  these,  contrary  to  their 
names,  became  inconvertible  paper  money,  but  were  withdrawn  from  circulation 
in  1875.  Moreover,  as  the  objects  of  their  issues  lay  in  the  adjustment  of  old  gold 
and  silver,  and  2  bu  gold  coins,  on  one  hand,  and  the  colonization  of  Hokkaido  on 
the  other,  these  two  loans,  which  amounted  to  the  aggregate  sum  of  9,000,000 
yen,  can  not  be  regarded  as  war  and  armament  loans. 


14      WAR  AND  ARMAMENT  LOANS:  HISTORICAL  SURVEY 

NEW  PAPER  MONEY 

The  New  Paper  Money  consisted  of  inconvertible  notes  of 
a  new  pattern,  which  were  issued  after  1871  to  prevent  the 
forgery  of  "Dajokwansatsu"  and  "Mimbushosatsu"  and  to 
adjust  various  clan  paper  moneys.  This  must  also  be  re- 
garded as  a  kind  of  war  loan. 

According  to  the  government  proclamation  of  May  28, 
1869,  the  "  Dajokwansatsu"  became  convertible  paper  money 
and  was  to  be  changed  for  new  coins  in  1872.  The  coinage  of 
new  coins,  however,  was  an  undertaking  which  had  the  widest 
economical  and  financial  bearings,  and  forbade  the  hasty 
completion  of  the  task.  Even  though  the  coinage  could  be 
accomplished,  the  possibility  of  withdrawing  the  paper  money 
in  exchange  for  new  coins  would  have  been  quite  out  of  the 
question,  the  Treasury  having  been  constantly  confronted 
with  a  shortage  of  revenue.  But  what  the  people  at  large 
considered  as  evils,  and  much  more  unendurable,  were  the 
facts  that  the  government  paper  money  already  issued  was  of 
extremely  inferior  quality,  thus  encouraging  forgery,  and  that 
the  so-called  "sensatsu"  issued  by  the  former  clans  consid- 
erably varied  in  value,  thus  wholly  depriving  them  of  the 
nature  of  legal  tender. 

Now  the  origin  of  this  latter  widely  circulated  paper  money 
may  be  traced  back  to  the  "  Kambun  "  Era,  when  it  was  issued 
by  the  Fukui  Clan  with  the  permission  of  the  Shogunate. 
Many  similar  issues  were  made  by  other  clans.  When  the 
downfall  of  the  Shogunate  had  brought  about  civil  disturb- 
ances throughout  the  whole  country,  all  the  clans  resorted  to 
increased  issues  of  this  note,  many  of  them  without  any  per- 
mission from  the  Shogunate.  On  the  abolition  of  the  clans, 
July  14,  1871,  the  government,  with  the  object  of  prohibiting 
the  issue  of  this  paper  money,  made  a  thorough  investigation, 
and  ascertained  the  amazing  fact  that  224  clans,  14  prefec- 
tures and  9  estates  of  direct  feudatories  of  the  Shogun  had  had 
recourse  to  this  expedient.  This  paper  money  included  gold 
paper  money,  silver  paper  money,  rice  paper  money  and  major 


MEIJI    RESTORATION    TO    SATSUMA   REBELLION  15 

and  minor  paper  money,  all  varieties  of  which  amounted  to 
the  large  figure  of  1,614.  The  total  value  was  estimated  at 
38,551,132  yen.  This  sum  was  found  to  have  been  over- 
estimated and  was  correctly  reduced  upon  further  investiga- 
tion, but  still  there  existed  24,935,109  yen  to  be  exchanged  for 
new  paper  money. 

The  circulation  of  these  clan  paper  moneys  was  limited  to 
the  four  corners  of  each  clan,  and  their  value  was  low  from 
the  very  time  of  their  issue.  Moreover,  their  manufacture 
was  crude  in  the  extreme,  and  the  system  of  specie  reserve  the 
most  imperfect  imaginable.  Their  increased  issue,  therefore, 
made  their  value  lower  and  lower,  and  often  they  were  as 
worthless  as  pieces  of  waste  paper. 

Thus  the  existence  of  these  worthless  notes  in  the  market 
impeded  business  transactions,  caused  fluctuations  of  prices, 
and  worst  of  all  prevented  the  circulation  of  government 
paper  money. 

This  state  of  things  made  the  government  keenly  realize 
the  necessity  of  preventing  the  forgery  of  clan  paper  moneys, 
and  the  need  of  unification  of  paper  money,  both  those  of  the 
clans  and  those  of  the  government.  Thus  as  early  as  in 
October,  1870,  the  government  sent  an  order  to  a  German 
firm  in  Frankfurt  to  manufacture  an  elaborate  paper  money 
to  the  value  of  103,537,359  yen,  with  a  view  to  exchanging  for 
it  all  the  paper  moneys  then  in  circulation.  On  December  27, 
1871,  a  notification  was  promulgated  concerning  the  issue  of 
new  paper  money.  It  was  subsequently  discovered  that  this 
new  note  was  easily  susceptible  to  injury,  thus  rendering 
renewal  necessary.  Therefore,  the  government  in  December 
of  the  same  year  imported  the  printing  machine  from  Ger- 
many, established  a  paper  money  factory  in  the  Mint,  and 
set  about  its  manufacture.  In  December,  1871 ,  the  amount  of 
paper  money  manufactured  there  bulked  to  the  total  sum 
of  45,904,037  yen,  and  this  served  as  a  reserve  paper  money  to 
be  issued  in  exchange  in  case  New  Paper  Money  already  in 
circulation  was  injured.  With  this  new  addition,  the  amount 
of  manufacture  of  New  Paper  Money  was  calculated  at 


1 6        WAR  AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 

149,441,396  yen.  The  New  Paper  Money  already  printed 
was  not  all  issued  immediately  upon  its  importation  or  manu- 
facture, only  a  portion  of  it  being  issued  in  exchange  for 
"  Kinsatsu,"  or  worn-out  New  Paper  Money  as  the  case  might 
be,  and  the  rest  was  kept  unissued  in  the  Treasury  as  a  so- 
called  "reserve  paper  money."  The  reserve  paper  money 
was  issued,  contrary  to  the  original  purpose,  to  cover  the 
deficit  of  the  annual  revenue,  and  this  sort  of  issue  was  tech- 
nically called  "Issue  of  Reserve  Paper  Money."  The  New 
Paper  Money  was  issued  beginning  with  February,  1872,  in 
accordance  with  the  aforesaid  decree  of  notification  of  Decem- 
ber 27,  1871.  The  maximum  amount  of  its  circulation  was 
attained  in  December,  1878,  when  it  figured  at  119,800,455 
yen,  excepting  the  "Issue  of  Reserve  Paper  Money,"  which 
we  shall  consider  later  on.  The  following  table  gives  the 
details : 1 

(1)  Issued  in  exchange  for  nearly  the  whole  of  the  "Dajo- 
kwansatsu,"  the  "Mimbushosatsu,"  the  Exchequer  Exchange 
Bonds  and  the  Colonial  Exchange  Bonds,  61,367,680  yen. 

(2)  Issued  in  exchange  for  Clan  Paper  Moneys,  22,908,434 
yen. 

(3)  Issued  in  exchange  for  replenishing  the  deficit  of  the 
annual  revenue,  8,525,444  yen. 

(4)  Issued  in  January,  1878,  in  accordance  with  a  notifica- 
tion of  December  27,  1877,  to  cover  the  expenditures  of  the 
Satsuma  Rebellion,  27,000,000  yen. 

In  addition  to  this,  there  was  an  exchange  reserve  paper 
money  which  was  issued  after  1872.  At  the  end  of  December, 
1878,  it  reached  the  enormous  maximum  of  19,618,116  yen. 
The  original  purpose  of  issuing  this  paper  money  was  equiva- 
lent to  that  of  the  Treasury  bills  of  the  present  day,  i.e.,  to  ob- 
tain temporary  cash  accommodation  for  the  Treasury.  But 
during  the  civil  disturbance,  it  was  issued  in  such  great  quan- 
tity, and  extending  over  several  fiscal  years,  that  its  issue 

1  Of  the  24,935,109  yen,  which  formed  the  total  sum  of  all  the  clan  paper  moneys, 
888,941  yen  was  redeemed  with  the  so-called  "Clan  Paper  Money  Reserve  Fund," 
and  1,136,217  yen  can  not  be  accounted  for.  The  remaining  sum,  22,908,434  yen, 
was,  as  is  shown,  replaced  by  New  Paper  Money. 


MEIJI   RESTORATION   TO    SATSUMA   REBELLION  IJ 

came  to  have  the  same  object  as  that  of  New  Paper  Money, 
and  indeed  to  become  the  supplement  of  the  latter. 

It  was  thus  that  the  notification  of  December  27,  1871, 
changed  the  form  of  convertible  government  paper  money  into 
that  of  inconvertible  New  Paper  Money,  the  intent  of  the 
notification  of  May  28,  1869,  being  completely  frustrated. 
Happily  for  the  government,  the  people  by  this  time  had  got 
accustomed  to  the  use  of  paper  currency,  and  preferred  it  to 
metal.  The  revision  of  the  promise  on  the  part  of  the  govern- 
ment was,  therefore,  carried  through  without  any  difficulties. 

One  more  word  must  be  added  here  as  to  the  existence  of 
what  is  called  the  "Reserve  Fund  for  the  Withdrawal  of  Paper 
Money  and  Public  Securities,"  which  was  instituted  in  June, 
1872.  This  fund  was,  in  July,  1878,  separated  from  the  sink- 
ing fund,  and  came  to  serve  as  specie  reserve  for  paper  issues. 
This  specie  reserve  consisted  of  10,000,000  yen  in  gold,  and  not 
only  the  interest  on  this  sum,  but  also  the  surpluses  of  the 
yearly  general  accounts  were  added  to  it  every  year.  But,  as 
is  clearly  seen  in  the  remarks  made  by  Count  Matsukata, 
Minister  of  Finance,  when  he  resumed  the  portfolio  in  1871, 
the  best  part  of  this  fund  had  been  transformed  into  advances 
and  public  bonds,  and  the  specie  left  only  amounted  to  8,000,- 
ooo  yen.  This  sum  was  insignificant  as  compared  with  the 
enormous  sum  of  the  aforesaid  paper  money  issued.  More- 
over, the  government  was  not  in  duty  bound  to  pay  specie  out 
of  this  fund  to  bearers  of  paper  moneys.  The  existence  of 
this  fund,  therefore,  can  not  traverse  the  inconvertibility  of 
government  paper  money  and  New  Paper  Money. 

"KINSATSU"  EXCHANGE  LOAN  BONDS 

The  "Kinsatsu"  Exchange  Loan  was  a  public  loan  issued 
after  March,  1873,  for  the  readjustment  and  consolidation  of 
the  "Kinsatsu"  (government  paper  money)  and  the  New  Pa- 
per Money,  above  described.  Inasmuch  as  these  two  paper 
moneys  had  been  issued  as  war  loans  in  connection  with  the 
Restoration,  the  newly  issued  loan  also  naturally  partook  of 
the  nature  of  a  war  loan. 


1 8         WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 

As  has  been  above  stated,  the  government  had  changed  the 
government  paper  moneys  and  the  clan  notes  into  inconvert- 
ible New  Paper  Money.  The  notification  of  May  28,  1869, 
however,  remained  unaltered.  The  government,  therefore, 
turned  out  as  many  coins  as  it  could ;  as  a  result,  a  great  quan- 
tity of  metallic  currency  found  its  way  into  circulation.  On 
account  of  the  yearly  increase  of  national  expenditures,  and  the 
unexpected  deficit  of  revenue,  it  was  impossible  for  the  gov- 
ernment to  fulfil  the  promise  of  exchange,  as  contained  in  the 
above  notification.  But  as  the  nonfulfilment  of  the  public 
promise  meant  a  great  injury  to  the  prestige  of  the  govern- 
ment, the  government  endeavored  to  find  some  appropriate 
solution.  Now  the  above  notification  contained  a  promise  to 
pay  0.5  per  cent  interest  per  month  (6  per  cent  per  annum) 
to  the  holders  of"  Kinsatsu  "  after  the  expiration  of  1872.  The 
government  decided  to  make  good  its  promise  by  delivering, 
on  application,  government  bonds  to  the  holders  of"  Kinsatsu  " 
(including  New  Paper  Money) ,  and  allowing  a  fixed  rate  of  in- 
terest every  year.  For  this  purpose,  the  "  Kinsatsu  "  Exchange 
Loan  Regulation  was  promulgated  by  Notification  of  the 
Dajokwan  No.  121  on  March  30,  1873,  consisting  of  eleven 
articles,  the  main  points  of  which  notification  may  be  sum- 
marized as  follows: 

(1)  The  bonds  shall  consist  of  (a)  Registered  Bonds  and  (b) 
Coupon  Bonds  (Art.   I).     A  Registered  Bond  is  a  bond  in 
which  the  name  of  the  owner  is  written  on  the  face  of  the  bond, 
and  also  entered  in  a  registry  kept  by  the  Department  of  Fi- 
nance.    Every  time  the  bond  is  transferred  from  one  person  to 
another  the  name  in  the  register  as  well  as  on  the  bond  itself 
shall  be  altered   (Art.  II).     A  Coupon  Bond  has  no  name 
written  in  the  register  nor  on  the  bond  itself.     Transfer  shall 
be  completed  by  mere  delivery  of  the  bond.     At  the  end  of 
the  bond  shall  be  attached  a  small  coupon  showing  the  amount 
of  the  interest  annually  to  be  paid  to  the  holder  of  the  bond 
(Art.  Ill,  Sec.  i). 

(2)  Both  kinds  of  bonds  shall  be  kept  in  circulation  for  the 
period  of  fifteen  years  from  the  date  of  issue  (March  5).     For 


MEIJI    RESTORATION    TO    SATSUMA    REBELLION  1 9 

seven  years l  from  the  date  of  acquisition  only  interest  shall  be 
paid  to  the  holder.  After  the  lapse  of  the  period,  which,  ac- 
cording to  the  revised  computation,  was  the  fourth  year  from 
the  date  of  acquisition,  certain  bonds  shall  be  drawn  by  lot 
and  the  principal  thereof  shall  be  repaid  at  any  time  the  gov- 
ernment may  think  fit.  The  holder  shall  not  be  allowed  to 
refuse  the  repayment  (Art.  IV). 

(3)  If  any  holder  of  "  Dajokwansatsu, "  "  Mimbushosatsu  " 
and  New  Paper  Moneys  wishes  to  have  them  exchanged  for 
the  above-mentioned  government  bonds  in  order  to  obtain  the 
interest  according  to  the  above  notification,  he  must  report  to 
the  Paper  Money  Bureau  of  the  Finance  Department  the 
amount  of  the  paper  money  he  has  in  his  possession,  in  accord- 
ance with  the  proceedings  provided  for  in  the  following  sec- 
tion of  this  article.     He  shall  receive  either  of  the  above  bonds 
mentioned  in  the  preceding  article,  according  to  the  discre- 
tion of  the  Department  (Art.  IV,  Sec.  i). 

(4)  The  rate  of  interest  on  both  bonds  shall  be  6  per  cent 
per  annum.     Payment  of  interest  shall  be  made  at  designated 
banks  in  Tokyo,  Osaka,  Yokohama,  Nagasaki,  Kobe,  Kyoto, 
Niigata,  Hakodate,  etc.,  and  the  dates  of  interest  payment 
shall  be,  on  both  bonds,  twice  every  year,  i.e.,  from  the  1st  to 
the  1 5th  of  July  and  from  the  1st  to  the  I5th  of  December. 

(5)  In  case  any  bonds  are  lost  or  stolen,  the  holder  must 
report  to  the  Paper  Money  Bureau  that  registered  bonds  or 
coupon  bonds  of  such  and  such  a  kind — stating  the  number 
and  amount — have  been  lost  or  stolen,  as  the  case  may  be. 
Thereupon  the  Paper  Money  Bureau  shall  immediately  make 
public  notification  to  all  the  local  government  offices  and 
banks  of  the  fact,  together  with  the  kind,  number  and  amount 
of  the  bonds  lost  or  stolen,  and  shall,  for  the  period  of  six 
months  after  the  date  of  loss  or  theft,  give  public  notice 
through  newspapers,  or  other  means  of  public  notification, 
that  the  above  bonds  shall  not  be  dealt  in. 

During  the  period  of  public  notice  neither  principal  nor  in- 

1  Changed  to  three  years,  according  to  a  revision  made  by  Notification  No.  264 
in  July,  1873. 


2O        WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 

terest  shall  be  paid.  When  the  bonds  have  not  been  discov- 
ered within  the  period  of  six  months,  the  said  Bureau  shall 
make  new  bonds  and  deliver  them  to  the  applicants,  but  the 
interest  that  accrues  during  the  period  of  public  notice  shall 
not  be  paid  until  the  next  date  of  payment  subsequent  to  the 
delivery  of  the  new  bonds  (Art.  VIII). 

When  bonds  have  been  washed  away  by  floods,  or  burnt, 
the  holders  thereof  shall  report  the  fact  to  the  Paper  Money 
Bureau,  according  to  the  preceding  provisions.  If  the  fact  of 
loss  by  flood  or  by  fire  be  established,  steps  similar  to  the  ones 
provided  for  in  the  previous  section  shall  be  taken.  In  case 
only  a  portion  of  bonds  be  burnt  or  otherwise  destroyed  so  as 
to  render  their  circulation  impossible,  the  holders  shall  report 
the  fact  to  the  Paper  Money  Bureau,  together  with  the  re- 
mainder of  the  bonds  and  apply  for  the  delivery  of  substitute 
bonds  (Art.  IX). 

(6)  This  law  shall  at  any  time  be  supplemented  or  revised 
if  the  government  thinks  it  necessary.  Public  notice  of  the 
supplement,  revision,  etc.,  shall  be  made  without  delay  (Art. 
XI). 

At  the  time  when  the  government  made  the  public  promise 
to  allow  6  per  cent  interest  for  the  outstanding  paper  money 
after  the  expiration  of  1872,  the  quotations  of  "Kinsatsu" 
were  low;  but  subsequent  recovery  of  its  value  caused  it  to  cir- 
culate at  a  par  with  new  coins,  thus  making  6  per  cent  inter- 
est on  it  appear  too  low.  Simultaneously  with  the  issue 
of  "Kinsatsu"  Exchange  Bonds,  therefore,  the  government 
promulgated  a  bank  regulation,  by  which  the  issue  of  bank 
notes  on  the  security  of  "Kinsatsu"  Exchange  Bonds  was 
allowed. 

The  object  of  this  regulation  was  to  maintain  the  price  of 
this  bond  by  making  the  banks  the  purchasers  of  it.  This 
expedient  proved  a  success,  inasmuch  as  it  checked  any  re- 
markable depreciation  of  the  bond,  although  there  was  not 
much  demand  for  it  among  the  people.  By  this  device  the 
government  was  able  to  withdraw  government  paper  money 
to  the  amount  of  2,230,000  yen,  in  round  numbers.  Not- 


MEIJI    RESTORATION   TO    SATSUMA   REBELLION  21 

withstanding  the  withdrawal  of  the  above  money,  however, 
the  increase  of  the  issue  of  the  New  Paper  Money  was  such 
that  in  1876  the  total  of  all  the  paper  moneys,  including  re- 
serve paper  money  issued,  surpassed  100,000,000  yen.  As  this 
enormously  big  sum  naturally  surpassed  the  demand  in  the 
market,  it  caused  the  value  gradually  to  decline.  It  was, 
therefore,  necessary  for  the  government  to  start  some  plans  to 
increase  the  issue  of  the  "Kinsatsu"  Exchange  Bonds  by 
guaranteeing  their  validity,  and  to  regulate  the  circulation  of 
the  paper  money.  Moreover,  people  were  then  so  ignorant  of 
the  nature  of  negotiable  securities  that  they  were  afraid  of 
accepting  unregistered  bonds.  The  government  also  found 
much  difficulty  in  forming  the  estimates  of  principal  and  in- 
terest to  be  distributed  to  each  district  to  meet  the  payment 
of  unregistered  bonds.  The  then  Minister  of  Finance,  fully 
convinced  of  the  desirability  of  revising  the  law  as  it  then 
stood,  subjected  the  revised  law  to  the  deliberation  of  the 
"Dajokwan,"  on  July  8,  1880.  The  revised  regulation  was 
issued  by  Notification  No.  47  of  October  27,  of  the  same  year, 
under  the  name  of  "Revised  Regulation  Concerning  'Kin- 
satsu'  Exchange  Loan,  "  the  chief  points  of  the  revision  being 
as  follows: 

(1)  The  "Kinsatsu"  Exchange  Loan  shall  be  issued  for  the 
exchange  and  redemption  of  the  paper  money  issued  by  the 
government,  and  the  principal  and  interest   of  the   "Kin- 
satsu"  Exchange  Loan  shall  be  paid  in  gold  and  silver  coins 
(Art.  I). 

(2)  The  "Kinsatsu"  Exchange  Loan  Bonds  shall  be  regis- 
tered bonds  with  coupons,  and  shall  consist  of  500  yen,  100 
yen,  and  50  yen  respectively  (Art.  II). 

(3)  The  paper  money  exchanged  by  "Kinsatsu"  Exchange 
Loan  Bonds  shall  be  destroyed  in  the  Finance  Department, 
according  to  the  regulation  relating  thereto. 

(4)  The  principal  of  the  "  Kinsatsu"  Exchange  Loan  Bonds 
shall  remain  unredeemed  for  three  years  from  the  date  of  de- 
livery of  the  instruments.     The  redemption  shall  be  comple- 
ted in  twelve  years,  beginning  with  1871,  and  shall  be  made  by 


22        WAR   AND  ARMAMENT   LOANS:   HISTORICAL   SURVEY 

lot,  according  to  the  discretion  of  the  government.  The  in- 
terest shall  be  6  per  cent  per  annum,  and  shall  be  paid  twice 
a  year,  i.e.,  in  May  and  November,  till  the  complete  redemp- 
tion of  the  principal  (Art.  V). 

(5)  Whoever  wishes  to  have  any  paper  money  exchanged 
for  "Kinsatsu"  Exchange  Loan  Bonds  must  present  an  appli- 
cation for  exchange,  stating  the  kind  of  paper  money,  together 
with  the  amount  thereof. 

(6)  Even  after  the  promulgation  of  the  present  regulation, 
the  "Kinsatsu"  Exchange  Loan  Bonds  shall  be  made  after  the 
form  of  the  unregistered  bonds  with  coupons  under  the  former 
regulation.     Unnecessary  and  contradictory  expressions  shall 
be  struck  out. 

(7)  The  "  Kinsatsu  "  Exchange  Loan  Bonds,  both  registered 
and  unregistered,  which  were  delivered  prior  to  the  promulga- 
tion of  this  regulation,  shall  be  exchanged  for  revised  ones 
(Art.  XIV). 

According  to  the  revised  regulation,  therefore,  the  issue  of 
"Kinsatsu"  Exchange  Loan  Bonds  was  intended  for  the  ex- 
change and  withdrawal  of  the  government  paper  money,  with 
the  ultimate  object  of  restoring  their  value  by  decreasing 
their  excessive  circulation.  A  comparison  between  the  orig- 
inal and  revised  regulations  easily  reveals  a  great  differ- 
ence in  the  objects  which  the  respective  regulations  were 
intended  to  attain.  When  the  original  regulation  was  pro- 
mulgated, the  government  paper  money  did  not  surpass  the 
demand,  and  so  their  prices  were  by  no  means  low.  The 
object  of  the  original  regulation,  therefore,  was  not  to  de- 
crease the  circulation  of  paper  money,  but  to  afford  an  expe- 
dient for  delivering  interest  to  the  holders  of  "Kinsatsu" 
Exchange  Bonds,  in  accordance  with  the  notification  of  1869. 
According  to  the  revised  regulation,  on  the  contrary,  principal 
and  interest  of  this  loan  were  to  be  paid  in  gold  and  silver 
coins.  If,  therefore,  a  depreciation  in  the  value  of  paper  cur- 
rency occurred,  and  it  became  beneficial  for  people  to  get  the 
principal  and  interest  in  the  form  of  specie,  this  would  nat- 
urally be  attended  with  a  demand  for  the  increased  issue  of 


MEIJI    RESTORATION   TO   SATSUMA   REBELLION  23 

the  exchange  bonds.  If  the  discrepancy  between  paper  and 
specie  ceased,  then  demand  for  exchange  would  again  decrease. 
Thus  by  the  natural  operation  of  this  regulation,  the  value 
of  paper  currency  could  be  maintained. 

Several  modifications  were  subsequently  made.  In  De- 
cember, 1883,  the  issue  of  registered  bonds  was  suspended. 
In  November,  1888,  when  efforts  were  made  to  unify  the  treat- 
ment of  all  sorts  of  public  debts,  the  "Kinsatsu"  Exchange 
Loans  fell  under  the  provisions  of  the  Consolidated  Loans  Reg- 
ulation Notification  No.  36,  October,  1886,  and  Procedure 
with  Respect  to  Consolidated  Loans  1  with  regard  to  principal 
refundment,  interest  payment,  sale  and  other  transfer,  losses, 
extinguishment,  defacement  and  destruction  of  bonds, etc.,  and 
these  rules  were  put  into  force  from  January,  1889. 

In  short,  "Kinsatsu"  Exchange  Loan  Bonds  were  ordi- 
narily issued  for  the  benefit  of  the  holders  of  government  notes 
who  wished  to  obtain  interest  on  them.  Though  the  exchange 
bonds  consisted  of  registered  and  unregistered  bonds,  no 
demand  was  made  for  unregistered  bonds  before  1875,  and 
between  1876  and  1879  no  demand  was  made  for  either  of  them. 
The  reason  is  not  very  far  to  seek.  The  market  rate  of  inter- 
est then  stood  at  more  than  15  per  cent,  thus  surpassing  that 
of  the  exchange  bonds  by  9  per  cent.  Moreover,  there  was  a 
general  falling  off  of  public  loans,  so  much  so  that  the  so-called 
"Voluntarily-Capitalized  Pension  Bonds,"  which  bore  8  per 
cent  interest,  could  be  bought  below  eighty  yen.  In  1880, 
just  before  the  revision  took  place,  there  appeared  some  de- 
mand for  this  bond.  On  account  of  the  revised  regulation, 
the  demand  increased  until  1883  in  spite  of  the  continued 
depreciation  of  the  paper  money.  This  was  wholly  due 
to  the  convertibility  of  the  exchange  bonds  into  metallic 
currency. 

The  issue  of  the  bonds  allotted  to  each  year  is  estimated 
as  follows: 

1  Finance  Department  Order  No.  30,  1886. 


24        WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 


Year  of  Issue 

In  Exchange  for 
"  Dajokwansatsu" 
and  "Mimbu- 
shosatsu" 

In  Exchange  for 
New  Paper 
Money 

Total 

1871.  . 

Yen 
1,580,200 

Yen 

Yen 
1,580,200 

1874.  .  . 

6^,^so 

6^,^50 

1875.  .  . 

25,000 

25,000 

1880  

•?,OO2,6SO 

3  002  650 

1881  

627,  5SO 

627  sso 

1882  

4.27,  QSO 

4.27  QSO 

1883.  . 

•*72,55O 

•*72,S5O 

Total  .  

2,2^8,  5  SO 

A.  4-20,700 

6,669,250 

Of  this  total,  5,219,550  yen  was  issued  under  the  original 
regulation  and  1,449,700  yen  under  the  revised.  According  to 
the  classes  of  applicants,  banks  and  companies  constituted  the 
overwhelming  majority  of  67  per  cent  of  the  total,  amounting 
to  4,465,650  yen.  This  was  due  to  the  fact  that  the  object  of 
the  National  Bank  Regulation  and  the  line  of  policy  taken  by 
the  government  with  regard  to  the  issue  of  this  loan  had  duly 
been  put  into  execution.  Besides,  there  were  unregistered 
"Kinsatsu"  Exchange  Loan  Bonds  amounting  to  7,929,900 
yen,  which  were  issued  in  1884  and  1886  in  accordance  with  the 
revised  regulation  of  1883. 

CONCLUSION 

~\ 

To  sum  up,  there  can  be  little  doubt  that  "  Dajokwansatsu  " 
(48,000,000  yen]  and  "Mimbushosatsu"  (45,000,000  yen) 
should  be  placed  in  the  category  of  war  and  armament  loans, 
inasmuch  as  they  were  inconvertible  paper  money  issued  as 
extraordinary  sources  of  war  revenue  at  the  Restoration.  A 
close  scrutiny  of  their  appropriations,  it  is  true,  will  show  us 
that  they  were  also  used  for  other  purposes  than  war  and 
armament.  But  in  view  of  the  fact  that  no  other  resources  for 
the  suppression  of  the  disturbances  existed  at  the  time  of  the 
Restoration,  we  consider  it  quite  proper  to  put  them  into  this 
category  of  war  and  armament  loans.  On  the  contrary,  Ex- 
chequer Exchange  Bonds  (68,000,000  yen)  and  Colonial 


MEIJI    RESTORATION   TO    SATSUMA   REBELLION  25 

Exchange  Bonds  (25,000,000  yen)  should,  in  view  either  of  the 
apparent  aims  for  which  they  were  issued  or  of  their  actual  ap- 
propriations, be  placed  outside  of  war  and  armament  loans. 
New  Paper  Money  should  also  be  called  war  and  armament 
loans.  It  is  true  that  this  paper  money  was  not  used  entirely  in 
exchange  for,  and  in  adjustment  of  war  and  armament  loans, 
since  it  was  used  to  exchange  and  adjust  61,367,680  yen  of  the 
aforesaid  four  kinds  of  government  notes  (the  total  of  which 
was  64,800,000  yen)  and  22,908,434  yen  of  Old  Clan  Paper 
Money.  But  we  must  not  lose  sight  of  the  fact  that  the  ma- 
jority of  it  was  appropriated  in'  exchange  for  and  in  adjust- 
ment of  "  Dajokwansatsu "  and  "Mimbushosatsu,"  which 
were,  as  was  shown  above,  war  and  armament  loans.  More- 
over, Old  Clan  Paper  Money  was  nothing  but  war  loans  of  the 
clans,  so  the  New  Paper  Money  issued  in  exchange  for  and  for 
the  adjustment  of  them  can  justly  be  looked  upon  as  war  and 
armament  loans  on  account  of  the  Meiji  Restoration.  In  ad- 
dition to  it,  the  amount  of  issue  of  New  Paper  Money  was  over 
84,276,114  yen,  which  was  the  sum  issued  in  exchange  for  the 
above-mentioned  notes.  In  1876,  it  amounted  to  100,521,516 
yen  and  in  1878,  as  the  result  of  increased  issue  in  connection 
with  the  Southwestern  Rebellion,1  it  reached  the  maximum 
figure  of  139,418,571  yen.  This  surplus  amount  was  appropri- 
ated for  the  replenishment  of  the  Treasury,  which  was  then 
suffering  a  heavy  strain  on  account  of  local  disturbances,  the 
Formosan  and  Korean  affairs,  and  expansion  of  military  and 
naval  armament.  Such  being  the  case,  we  find  no  impropriety 
in  calling  New  Paper  Money  by  the  name  of  war  and  armament 
loan.  Lastly,  the  "Kinsatsu"  Exchange  Loan  Bonds  un- 
doubtedly partake  of  the  nature  of  war  and  armament  loans 
because,  of  the  6,669,250  yen  which  was  the  total  sum  of  issue, 
2,238,550  yen  was  issued  in  exchange  for  government  notes, 
and  4,430,700  yen  in  exchange  for  New  Paper  Money. 

The  following  table  details  all  the  war  and  armament  loans 
from  the  Restoration  (1868)  to  the  Satsuma  Rebellion  (1877): 

1  Satsuma  Rebellion. 


26        WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 
LOANS  FROM  RESTORATION  TO  SATSUMA  REBELLION1 


Calendar  Year 

Dajokwan- 
satsu 

Mimbusho- 
satsu 

New  Paper 
Money 

Kinsatsu 
Exchange 
Loan 

Total 

1868  

Yen 
24..O^7.l86 

Yen 

Yen 

Yen 

Yen 

24  0^7.^86 

1869.  . 

48,OOO,OOO 

2,090,867 

SO,oqo,867 

1870.  .  . 

48,OOO,OOO 

7,500,000 

55,500,000 

1871.  . 

48,OOO,OOO 

7,500,000 

55.5OO.OOO 

1872.  . 

4.^.2  "U.O^S 

7,474,8^ 

8,174,107 

58.OQQ.QQ8 

IS?*;.    . 

•;6.  86  T,,  722 

7.247.824 

2S,S^S,^2S 

1,580,200 

71,227,071 

l874.    . 

26    57^,507 

6.  -177,646 

57.2O8,I7O 

2,2I^,SSO 

02,^72,87^ 

1875  

5,147,017 

2,^7,886 

91,584,067 

2,238,550 

101,308,419 

1876  

-l.OQS.Q2  1 

I  ,  S4O.OOO 

100,521,516 

2,IOS.9C>O 

107,263,387 

1877.  . 

3.O7O.I4S 

I.SIQ.686 

IOI.207,  25Q 

2.IOS.9SO 

IO7,QO'l,O4O 

The  war  and  armament  loans  issued  during  the  period  from 
the  Restoration  to  the  Satsuma  Rebellion  were  confined  to  the 
above-mentioned  paper  moneys  and  the  "Kinsatsu"  Ex- 
change Loans.  If  we  take  public  loans  at  large  into  consid- 
eration, there  were  in  addition  the  9  per  cent  Foreign  Loan 
amounting  to  4,880,000  yen,  and  the  loans  for  the  reform  of  po- 
litical institutions  (including  7  per  cent  Foreign  Loan,  Volun- 
tarily-Capitalized Pension  Bonds,  and  Hereditary  Pension 
Bonds).  This  9  per  cent  Foreign  Loan  was  the  first  loan 
raised  by  public  subscription  by  this  country.  It  was  raised 
in  London  in  April,  1870,  and  the  proceeds  were  appropriated 
to  public  works  expenditures,  such  as  the  construction  of  the 
railways  between  Tokyo  and  Yokohama  and  between  Kobe 
and  Osaka. 

1  Based  on  the  Financial  History  of  the  Meiji  Era  and  special  investigation. 
What  is  called  New  Paper  Money  includes  Exchequer  Exchange  Notes, 
Colonial  Exchange  Notes,  exchanged  Old  Clan  Notes  and  Reserve  Paper  Money. 
As  the  figures  of  these  notes  can  not  be  separated  from  those  of  New  Paper  Money, 
they  have  been  inserted  as  they  stood.  "Kinsatsu"  Exchange  Loan  Bonds  were 
issued  in  great  amount  after  1880,  so  the  above  figures  do  not  show  the  amount  of 
maximum  issue. 


CHAPTER   III 

FROM  THE  SATSUMA  REBELLION  TO  THE  SINO- 
JAPANESE  WAR 

Friction  among  the  Cabinet  members  over  the  question  of 
Korean  conquest,  added  to  the  local  disturbances,  made  the  al- 
ready confused  state  of  things  worse  confounded,  and  the  result 
was  the  famous  Satsuma  Rebellion  of  1877.  In  this  rebellion, 
Saigo  Takamori,  one  of  the  veteran  statesmen  of  the  Restora- 
tion, who  enjoyed  a  wide  popularity  and  was  well  versed  in 
military  tactics,  acted  as  the  head  of  the  insurrection.  Ku- 
mamoto,  Fukuoka,  Saga  and  other  places  in  Kyushu,  not  to 
speak  of  Satsuma,  his  birthplace,  responded  to  his  call.  They 
resisted  the  Imperial  forces  until  they  were  destroyed  to  the 
last  man.  The  suppression  of  the  rebels,  therefore,  involved 
much  time  and  a  great  array  of  forces.  The  number  of  sol- 
diers who  fought  for  the  government  was  above  66,000,  and  the 
line  of  battle  extended  over  20  or  30  ri.  More  than  200  days 
had  passed  before  the  rebels  were  completely  subdued  by  the 
defeat  at  Shiroyama.  The  law  of  requisition  at  the  time  left 
a  great  deal  to  be  desired.  Moreover,  as  the  scene  of  action 
lay  in  mountainous  districts  the  roads  were  so  bad  that  resort 
could  not  be  had  to  ships  and  wagons.  Commissariat  and 
transportation,  therefore,  had  to  be  left  in  the  hands  of  coolies, 
whose  pay  amounted  to  no  small  sum.  Increase  of  police 
force  in  the  provinces,  punishment  of  rebels,  postbellum  relief 
of  the  distressed,  and  the  reward  afforded  to  the  soldiers  en- 
gaged in  the  campaign  necessitated  an  enormous  outlay  from 
the  Treasury. 

Thus  the  estimate  of  the  war  expenses  figured  42,000,000 
yen,  which  was,  of  course,  too  large  a  sum  to  be  defrayed  out  of 
the  ordinary  revenue.  To  resort  to  an  ordinary  loan  would 
have  been  impossible,  except  at  an  enormous  rate  of  interest. 
Increase  of  the  amount  of  taxes,  however,  would  have  estranged 

27 


28        WAR   AND   ARMAMENT   LOANS:   HISTORICAL    SURVEY 

the  confidence  of  the  people,  as  an  ordinance  concerning  the 
curtailment  of  taxes  had  been  issued  not  long  before.  There- 
upon, in  1877  and  1878,  the  government  borrowed  bank  notes 
amounting  to  15,000,000  yen  from  the  Fifteenth  National 
Bank  to  defray  a  part  of  the  expenses.  This  is  what  is  called 
"the  Conquest  Loan."  Not  only  was  this  expedient  insuffi- 
cient to  cover  all  of  the  conquest  expenses,  but  the  bank  notes 
could  not  be  circulated  in  the  battle  zones.  The  government 
had  no  other  alternative  than  to  issue  Reserve  Paper  Money  to 
the  amount  of  27,000,000  yen,  which  it  did  in  February,  1877, 
by  Decree  No.  87.  Thus  the  loans  from  the  Fifteenth  Na- 
tional Bank  (15,000,000  yen),  the  increased  issue  of  New 
Paper  Money  (27,000,000  yen),  and  contributions  (10,000  yen) 
were  sufficient  to  cover  the  total  of  the  war  expenses,  which, 
according  to  final  accounts  made  in  October,  1878,  figured  at 
41,567,7263;^. 

There  were  two  problems  after  the  war  which  needed  atten- 
tion, i.e.,  the  adjustment  of  paper  moneys,  and  the  increase  of 
armament.  The  adjustment  of  paper  moneys  was  chiefly 
effected  by  the  establishment  of  the  Bank  of  Japan,  1882,  and 
the  enforcement  of  the  Bank  Note  Regulation,  1884.  This 
problem  had  no  direct  relation  with  war,  but  the  loan  of  the 
paper  moneys  redemption  fund  from  the  Bank  of  Japan,  1888, 
must  be  regarded  as  an  auxiliary  consequence  of  the  war. 

The  extension  of  armament  was  effected  both  in  the  navy 
and  in  the  army.  Expenses  for  the  increase  of  naval  arma- 
ment were  defrayed  out  of  the  Navy  Loan,  floated  by  the  Navy 
Loan  Regulation,  1886.  Expenses  for  the  military  arma- 
ment were  paid  by  the  Bank  of  Japan  out  of  the  Temporary 
Loan,  which  was  effected  in  accordance  with  an  agreement  be- 
tween the  Cabinet  and  the  Bank  of  Japan  in  1886. 

There  were  two  Korean  affairs,  viz.,  one  in  1882  and  the 
other  in  1884  and  1885,  which  involved  1 ,425,375  yen  and  139,- 
088  yen,  respectively.  These  sums  were  covered  by  national 
reserve  funds  and  ordinary  revenue,  and  had  nothing  to  do  with 
public  loans. 

In  short,  the  war  and  armament  loans  from  the  Satsuma 


SATSUMA    REBELLION    TO    SINO-JAPANESE   WAR  29 

Rebellion  to  the  Sino-Japanese  War  consisted  of  the  Loan  for 
the  Suppression  of  the  Rebellion,  the  issue  of  Reserve  Paper 
Money,  the  Loan  of  the  Paper  Money  Redemption  Fund, 
the  Navy  Loan,  and  the  Temporary  Loan  for  the  Army,  which 
will  be  treated  successively  in  the  following  sections. 

LOAN  FOR  THE  SUPPRESSION  OF  THE  REBELLION 

To  cover  the  expenses  of  the  Satsuma  Rebellion,  the  govern- 
ment contracted  a  loan  from  the  Fifteenth  National  Bank  by 
a  written  agreement  made  by  the  National  Loan  Bureau  of  the 
Finance  Department.  The  loan  extended  over  a  term  of  twen- 
ty years;  and  15,000,000  yen  out  of  the  bank  notes,  which  the 
same  bank  issued  with  the  government's  permission,  was  to  be 
appropriated  for  this  purpose.  The  interest  was  fixed  at  5 
per  cent  per  annum. 

The  Fifteenth  National  Bank  had  been  established  by  a 
number  of  peers  with  a  capital  of  17,826,000  yen,  which  con- 
sisted of  public  bonds.  The  bank  had  received  the  delivery  of 
the  bank  notes  which  it  issued  on  the  security  of  the  deposited 
public  bonds.  It  had  not  been  easy  for  the  bank  to  make 
use  of  this  prodigious  amount  of  bank  notes.  This  govern- 
ment loan  on  account  of  the  Satsuma  Rebellion,  therefore, 
just  suited  the  needs  of  the  Fifteenth  National  Bank.  The 
interest  of  the  loan,  however,  was  felt  to  be  too  low,  as  the 
market  rate  of  interest  at  that  time  exceeded  10  per  cent  per 
annum. 

In  accordance  with  the  above-mentioned  agreement,  the 
said  bank  paid  9,486,000  yen  and  5,514,000  yen  during  1877 
and  1878,  respectively.  After  the  completion  of  the  payment 
of  the  loan,  which  was  made  in  forty- two  instalments,  the  said 
bank  twice  tendered  a  petition  to  the  government  for  an  in- 
crease of  the  rate  of  interest,  once  in  October,  1879,  and  again 
in  January,  1880,  to  which,  however,  the  government  turned 
a  deaf  ear. 

The  restoration  of  peace  after  the  suppression  of  the  Re- 
bellion brought  out  unmistakably  the  evils  of  the  overissue  of 
inconvertible  notes.  Thus,  the  depreciation  of  paper  cur- 


3O        WAR   AND   ARMAMENT   LOANS  I   HISTORICAL   SURVEY 

rency,  exportation  of  metallic  currency,  unfavorable  balance 
of  trade,  rise  in  prices  and  in  interest  rates,  and  the  deprecia- 
tion of  public  bonds  ensued  in  succession.  This  storm  and 
stress  of  the  economic  world  compelled  the  government  to 
take  various  remedial  measures. 

Now  the  said  bank  could  issue  bank  notes  beyond  the  limit 
provided  for  in  the  National  Bank  Regulations,  though  the 
reserve  bonds  decreased  a  great  deal  on  account  of  the  afore- 
said loan  made  to  the  government. 

Such  an  anomaly,  it  is  true,  was  quite  unavoidable  in  time 
of  disturbances,  for  alleviating  the  financial  stress  of  the  gov- 
ernment. But  when  peace  was  restored,  and  when  the  ad- 
justment of  paper  moneys  was  considered,  the  overissue  was 
found  to  be  a  serious  difficulty  in  the  way  of  financial  adjust- 
ment. After  the  unification  of  the  paper  moneys,  which  had 
been  effected  by  decree  No.  15,  1883,  the  government,  in  July 
of  the  same  year,  modified  the  previous  agreement  by  issuing 
an  order  in  accordance  with  which  the  government  repaid 
5,000,000  yen  out  of  the  total  sum  of  the  loan ;  thus  enabling  the 
said  bank  to  redeem  2,400,000  yen,  which  had  been  the  amount 
in  excess  of  the  legal  limit,  and  also  enabling  the  bank  to  in- 
crease the  reserve  fund  so  as  to  comply  with  the  amount  pro- 
vided for  in  the  National  Bank  Regulation.  Having  once 
deprived  the  bank  of  the  privilege  of  overissue,  the  govern- 
ment, on  its  part,  had  no  reason  to  borrow  money  from  the 
bank  at  the  low  interest  of  5  per  cent.  So  with  the  repay- 
ment of  5,000,000  yen,  the  government  revised  the  rate  of 
interest  on  the  remaining  sum  to  7.5  per  cent. 

On  July  10,  1892,  the  Fifteenth  National  Bank  requested 
the  government  to  repay  the  loan  by  instalments,  i.e.,  2,000,000 
yen  in  November,  1895,  and  May  and  November,  1896,  and 
4,000,000  yen  in  May,  1897,  when  the  term  of  the  loan  ex- 
pired. The  reason  assigned  for  this  mode  of  payment  was 
that  if  the  loan  were  repaid  at  a  single  time,  at  the  expiration 
of  the  term,  it  would  greatly  affect  the  money  market.  This 
mode  of  redemption  found  high  favor  with  the  government,  as 
it  was  conducive  to  the  adjustment  of  its  finance.  On  April 


SATSUMA   REBELLION    TO    SINO- JAPANESE   WAR  3! 

22,  1896,  this  request  was  granted,  and  it  was  duly  executed 
by  the  government.  Of  4,000,000  yen,  to  be  repaid  on  May 
20,  1897,  however,  2,000,000  yen  was  paid  in  cash  and  the  re- 
maining 2,000,000  yen  by  delivery  of  Consolidated  Public 
Loan  Bonds,  in  accordance  with  a  subsequent  request  of  the 
Fifteenth  National  Bank  made  in  July,  1896. 

RESERVE  PAPER  MONEY  AND  TEMPORARY  LOAN  FOR  THE 
REDEMPTION  OF  PAPER  MONEY 

Reserve  paper  money  was  that  which  had  been  procured 
from  Germany  in  1870  to  be  issued  in  exchange  for  damaged 
paper  currency.  As  the  sum  exchanged  was  very  big,  amount- 
ing to  10,000  yen  a  month,  the  authorities  decided  in  1877  to 
manufacture  the  money  within  the  country,  and  thus  40,441,- 
524  yen  was  manufactured  at  home.  Reserve  paper  money 
was  issued  not  only  in  exchange  for  damaged  paper  money, 
but  also  to  save  the  Treasury  from  financial  crises.  After  1878 
the  issue  of  this  paper  money  for  purposes  of  equalizing  the 
revenue  and  the  expenditure  in  the  general  account  became 
quite  common. 

In  order  to  meet  the  expenses  of  the  Satsuma  Rebellion,  the 
government  borrowed  bank  notes  from  the  Fifteenth  National 
Bank.  But  when  the  Fifth  National  Bank  in  Kagoshima  fell 
into  the  hands  of  the  insurgents,  and  its  bank  notes  were  put  in 
circulation  in  the  field  of  combat,  bank  notes  generally  lost  their 
credit  in  the  neighborhood,  and  their  circulation  was  greatly 
impeded.  Hereupon,  the  government  declared  its  intention  of 
issuing  reserve  paper  money  by  Notification  No.  87  of  Decem- 
ber, 1877,  and  in  the  following  year  there  was  an  issue  of  no  less 
than  27,000,000  yen.  The  war  expenses  were  successfully  met 
by  this  expedient,  but  it  made  the  more  necessary  a  postbellum 
readjustment  paper. 

At  first  the  New  Paper  Money  was  issued  to  readjust  govern- 
ment paper  moneys,  and  the  latter  were,  in  1874,  almost  super- 
seded by  the  former.  The  issue  of  New  Paper  Money,  how- 
ever, was  not  restricted  to  the  extent  of  this  primary  object; 
and  it  went  on  increasing  until  at  the  end  of  1876  it  reached 


32        WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 

100,500,000  yen.  To  this  already  enormous  sum  was  further 
added  the  reserve  paper  money  amounting  to  27,000,000  yen 
issued  in  connection  with  the  Satsuma  Rebellion,  the  circula- 
tion of  which  at  the  end  of  1878  stood  at  139,418, 571  yen. 
Moreover,  the  national  bank  notes  which  had  reached  the  to- 
tal of  only  i  ,744,000  yen  at  the  close  of  1876  rose  to  26,279,006 
yen  at  the  end  of  1878  on  account  of  the  credit  notes  of  the 
Fifteenth  National  Bank  during  1877  and  1878.  Thus  the 
grand  total  of  paper  money  rose  to  the  unprecedented  sum 
of  165,697,598  yen. 

As  a  result  of  such  an  enormous  inflation  of  paper  currency, 
the  fall  of  its  value  could  not  be  averted,  and  its  value  against 
silver  coins  continued  to  go  down  from  1877,  the  depreciation 
reaching  its  maximum  in  1881.  Prices  and  interest  rose 
rapidly  and  our  economic  affairs  were  on  the  brink  of  a  great 
panic.  Realizing  that  some  expedient  must  be  resorted  to, 
the  government  exerted  itself  to  the  utmost  to  withdraw  and 
redeem  paper  moneys. 

For  this  purpose  the  government  revised  by  Proclamation 
No.  40,  September  27,  1880,  the  Sake  Manufacture  Tax  Regu- 
lation, doubling  the  rate,  and  appropriating  the  increased  re- 
ceipts. Also  for  this  purpose,  the  government  by  Proclama- 
tion No.  48,  November  5,  1880,  extended  the  scope  of  local 
finance,  thus  relieving  the  national  Treasury.  At  the  same 
time  it  carried  out  the  curtailment  of  department  expenditures. 
To  attain  the  same  object,  the  government  sold  several  fac- 
tories built  by  itself,  and  abolished  the  loaning  of  the  reserve 
fund.  Thus  every  effort  was  made  to  increase  the  fund  for  the 
redemption  of  paper  money.  Count  Matsukata,  especially, 
the  then  Minister  of  Finance,  not  only  withdrew  paper  cur- 
rency, but  also  accumulated  metal  in  preparation  for  the  adop- 
tion of  the  conversion  system.  By  Proclamation  No.  32,  June 
27,  1882,  the  Bank  of  Japan  Regulation  was  enacted,  and  on 
October  10  of  the  same  year  the  Bank  of  Japan  commenced  its 
business.  As  the  difference  between  silver  and  paper  money 
was  still  considerable,  the  government  forbade  the  issue  of 
convertible  bank  notes  by  Article  14  of  the  same  regulation. 


SATSUMA   REBELLION   TO   SINO-JAPANESE  WAR  33 

The  efforts  of  the  government  to  redeem  paper  money  and  ac- 
cumulate metallic  currency  raised  the  value  of  paper  currency, 
and  the  discrepancy  between  them  well-nigh  disappeared. 
By  Proclamation  No.  18,  May  18,  1884,  the  Convertible  Bank 
Notes  Regulation  was  enacted,  and  on  May  9,  1885,  the  Bank 
of  Japan  issued  the  first  convertible  bank  notes.  Further,  by 
Proclamation  No.  14,  June  6,  1885,  it  was  provided  that  the 
paper  money  issued  by  the  government  should  be  exchanged 
for  silver  coins  from  January,  1886,  and  that  the  converted  pa- 
per money  should  be  withdrawn  from  circulation.  At  the  end 
of  June,  1888,  the  paper  moneys  in  circulation  decreased  to  only 
a  little  above  49,700, 1 58  yen.  This  was  a  good  opportunity  for 
the  government  to  lay  the  foundation  for  our  monetary  system, 
and  it  revised  the  Convertible  Bank  Notes  Regulation  by  Im- 
perial Ordinance  No.  57,  August  1 ,  1 888.  The  issue  of  convert- 
ible notes  on  security  reserve  was  limited  to  70,000,000  yen,  of 
which  20,000,000  yen  was  to  be  borrowed  by  the  government, 
at  the  rate  of  2  per  cent  per  annum,  for  the  redemption  of  gov- 
ernment paper  moneys.  Its  carrying  into  effect  was  post- 
poned to  some  future  date.  This  gave  rise  to  temporary  loans 
for  the  redemption  of  paper  moneys.  By  Law  No.  34,  May 
1 6,  1890,  the  government  revised  Article  2  of  the  Convertible 
Bank  Notes  Regulation,  and  the  issue  limit  of  convertible  notes 
on  documentary  reserve  was  increased  from  70,000,000  yen  to 
85,000,000  yen.  Of  this  sum,  22,000,000  yen  was  to  be  loaned 
to  the  government  without  interest  for  the  redemption  of  gov- 
ernment paper  money.  Imperial  Ordinance  No.  59,  August, 
1888,  could  thus  be  carried  into  effect.  The  Finance  Minister 
borrowed  22,000,000  yen  from  the  Bank  of  Japan  in  the  fiscal 
year  1890,  which,  together  with  the  Paper  Money  Redemption 
Reserve  amounting  to  10,000,000  yen,  was  transferred  to  the 
Paper  Money  Exchange  Fund.  This  fund  was  appropriated 
for  the  exchange  and  redemption  of  government  paper  money 
upwards  of  one  yen. 

With  regard  to  the  repayment  of  this  temporary  loan  it  was 
laid  down  that  it  should  remain  unredeemed  for  six  years  be- 
ginning with  September  I,  1890,  and  was  gradually  to  be  paid 


34        WAR   AND   ARMAMENT   LOANS:    HISTORICAL    SURVEY 

off  not  later  than  1912,  at  the  convenience  of  the  government. 
This  sum  has  remained  unchanged  up  to  date  in  the  statistics 
of  our  national  indebtedness. 

NAVY  LOAN 

Our  navy  strength  at  the  Restoration  amounted  to  only  a 
little  above  10,000  tons.  It  consisted  of  warships  collected 
from  Satsuma,  Choshu,  Hizen  and  other  clans,  and  of  those 
transferred  from  the  Shogun.  Following  the  increase  of  army 
strength  in  1872,  the  expansion  of  our  naval  force  was  carried 
out  on  a  small  scale,  and  new  warships  were  constructed.  As 
military  activities  of  the  period  were  chiefly  limited  to  internal 
affairs,  the  authorities  were  not  confronted  with  a  need  of  na- 
val expansion.  But  frequent  disturbances  in  Korea  after  the 
Satsuma  Rebellion  made  them  conscious  of  the  necessity  of 
naval  preparations.  In  1882,  the  naval  authorities  estab- 
lished a  program  for  building  new  warships.  This  program 
was  approved  by  the  Cabinet  council,  and  it  was  decided  that 
26,640,000  yen  should  be  disbursed  as  naval  expansion  expend- 
iture, during  the  period  from  1883  to  1890.  The  amount  dis- 
bursed to  the  end  of  1885  amounted  to  9,903,491  yen. 

It  was  attended  with  a  good  result.  Inasmuch  as  the  ordi- 
nary annual  revenue  fell  short  of  the  expenditures  on  various 
works  and  undertakings,  which  required  immediate  attention, 
it  was  quite  out  of  the  question  for  the  government  to  rely 
upon  the  ordinary  sources  of  revenue  for  armament  expansion. 
A  policy  was,  therefore,  adopted  to  raise  a  domestic  loan  for 
naval  expansion  to  the  amount  of  16,735,608  yen,  the  remain- 
ing sum  to  be  paid  according  to  the  prearranged  program.  By 
Imperial  Ordinance  No.  47,  June  12,  1886,  it  was  proposed  to 
raise  an  8  per  cent  public  loan  amounting  to  17,000,000  yen. 
This  was  the  so-called  "  Navy  Loan,"  which  was  the  first  arma- 
ment loan  in  this  country. 

The  provisions  of  the  ordinance  were  concerned  with  the 
amount  of  issue,  the  rate  of  interest,  the  term  of  redemption, 
the  date  of  interest  payment  and  a  few  other  conditions,  all 
other  particulars  not  provided  for  in  the  regulation  being  re- 


SATSUMA   REBELLION   TO    SINO-JAPANESE   WAR  35 

ferred  to  the  regulation  concerning  the  Nakasendo  Railway 
Bonds. 

Before  the  flotation  of  the  Navy  Loan  was  completed,  a  regu- 
lation concerning  the  Consolidated  Public  Loan  in  October 
of  the  same  year  was  adopted  with  the  object  of  unifying  the 
management  of  public  debts.  A  part  of  Navy  Loan  Bonds 
Regulation  was  modified  by  Imperial  Ordinance  No.  I,  Febru- 
ary, 1887,  by  which  the  unregistered  bond  was  made  the  stand- 
ard, being  changeable  into  the  registered  bond,  upon  request 
of  creditors,  all  other  particulars  not  provided  for  in  the  regu- 
lation being  referred  to  the  Consolidated  Loans  Regulation. 
The  Navy  Loan  was  raised  by  par  subscription  and  premium 
issue  during  the  period  from  June,  1886,  to  March,  1889,  in 
four  issues.  Judging  from  the  circumstances  of  each  flotation, 
the  adjustment  of  paper  currency  had  already  been  estab- 
lished, organs  of  monetary  circulation  had  been  furnished, 
and  the  consolidation  of  public  liabilities  had  already  begun. 

The  monetary  circulation  became,  therefore,  very  smooth, 
and  interest  fell,  which  accounted  for  the  high  market  price  of 
government  securities. 

The  Navy  Loan  was  raised  in  four  issues  during  the  period 
extending  from  1896  to  1899.  The  first  issue  was  made  in 
June,  1886,  the  second  in  March,  1887,  the  third  in  February, 
1888,  and  the  fourth  in  March,  1889.  The  total  sum  of  flota- 
tion by  these  four  issues  amounted  to  17,000,000  yen.  Not- 
withstanding the  fact  that  the  minimum  price  was  fixed  at  par, 
every  issue  was  attended  with  great  success.  The  total  sum 
subscribed  amounted  to  33,968,800  yen,  nearly  double  the  sum 
invited.  The  government,  therefore,  allotted  the  subscrip- 
tions from  the  maximum  price,  no  yen,  down  to  100  yen,  and 
the  sum  actually  received  by  the  national  Treasury  was  more 
than  17,244,153  yen.  There  was  an  increased  receipt  amount- 
ing to  244,135  yen,  the  sum  invited  being  17,000,000  yen, 
which  was  wholly  due  to  the  premium  issue.  Its  average  price 
was  calculated  at  101,436  yen. 

The  general  facts  concerning  each  flotation  are  summarized 
and  tabulated  as  follows: 


36        WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 

NAVY  LOAN1 


Items 

First 
Issue 

Second 
Issue 

Third 
Issue 

Fourth 
Issue 

Total  or 
Average 

Total    amount    of    sub- 
scription   

Yen 
16  642,300 

Yen 
8,4.4.7,700 

Yen 
•*,84.5,SOO 

Yen 
s.o^.^oo 

Yen 
33  9^8  800 

Minimum  price  of  flota- 
tion   

IOO 

IOO 

IOO 

IOO 

IOO 

Amount  of  flotation.  .  .  . 
Minimum  price  of  sub- 
scription         

5,000,000 
670  700 

6,000,000 

2  653  8OO 

2,000,000 

2.SSO.2OO 

4,000,000 

709  2OO 

17,000,000 
6  583  900 

Number     of     premium 
subscriptions  

IS.Q7I.6OO 

5,79^,QOO 

I,2Q<?,^OO 

4,  124,  IOO 

27,  ^84,000 

Net  proceeds  

5,  187,8^2 

6,04.8,715 

2,OO4,2IO 

4..  OO  •*,•?<}  5 

17,24.4.,!  ST. 

Excess  of  subscription  .  . 
Maximum  price  of  sub- 
scription   

11,642,300 
no 

2,447,700 
IOS 

1,845,500 
I  O2 

1,033.300 
IOI 

16,968,800 
104. 

Maximum  price  of  sub- 
scription at  the  main 
office  

no 

IOS 

I  O2 

IOI 

I  O4 

Minimum  price  of  pre- 
mium subscription  .  .  . 
Average    price    of    sub- 
scription   

IOO 
102 

IOO 
IOO 

IOO 
IOO 

IOO 
IOO 

IOO 
IOI 

Average  price  of  allot- 
ments   

103 

IOO 

IOO 

IOO 

IOI 

TEMPORARY  LOAN  FOR  ARMY  EXPENDITURES 

Army  expenditures,  except  in  cases  of  war,  were  defrayed 
out  of  the  ordinary  annual  revenue.  By  the  experiences 
which  the  government  obtained  in  the  Satsuma  Rebellion,  the 
necessity  of  arms  and  ammunition  improvement  was  brought 
home  to  the  minds  of  the  authorities-.  They  decided  that, 
apart  from  the  ordinary  army  expenditure,  an  annual  sum  of 
188,300  yen  should  be  disbursed  for  the  period  of  fifteen 
years  beginning  with  1878,  the  sole  object  having  been  the 
manufacture  of  new  style  rifles  for  army  use  and  the  manu- 
facture of  ammunition.  The  progress  along  this  line  was  care- 
fully attended  to,  and  it  was  not  infrequent  that  the  allotted 
amount  for  the  following  financial  year  was  employed  in  order 
to  meet  the  demands  of  the  occasion.  In  the  fiscal  years  of 

1  Based  on  the  Financial  History  of  the  Meiji  Era.     Figures  under  one  yen  have 
been  omitted. 


SATSUMA   REBELLION   TO    SINO-JAPANESE   WAR 


37 


1885  and  1886  in  order  to  speedily  complete  the  work  by  em- 
ploying the  allotments  for  the  several  years  to  come,  it  was  de- 
cided that  a  temporary  loan  should  be  obtained  from  the  Bank 
of  Japan,  and  that  the  loan  should  be  repaid  out  of  the  annual 
allotments  for  the  years  to  come.  This  was  the  so-called  Tem- 
porary Loan  for  the  Expenditure  upon  New  Style  Rifles  for 
Army  Use,  and  upon  Ammunition  Manufacture.  As  soon  as 
this  decision  was  made,  the  Finance  Minister  delivered  to  the 
Bank  of  Japan  a  written  agreement  with  regard  to  the  Tempo- 
rary Loan  on  May  26,  1886.  According  to  this  agreement  the 
amount  of  the  loan  was  1,337,298  yen,  which  could  be  bor- 
rowed from  the  bank  at  any  time  before  March  31,  1888,  with 
interest  at  5.5  per  cent.  The  interest  was  to  accrue  from  the 
day  the  loan  was  made  to  the  day  previous  to  the  redemption. 
The  amount  to  be  borrowed  in  each  fiscal  year  was  fixed  be- 
forehand, but  actually  it  was  more  or  less  modified  to  suit  the 
convenience  of  the  military  department.  The  entire  loan  was 
completed  on  December  15,  1888,  in  twenty-one  instalments 
in  all.  The  following  table  shows  the  details  of  the  amount 
borrowed  in  each  fiscal  year: 

TEMPORARY  LOAN  FOR  ARMY  EXPENDITURES 


Fiscal  Year 

Number 
of  Loans 

Amount  of 
Loans 

Amount  Converted 
Out  of  the  Amount 
of  Loans* 

Net  Amount 
of  Loans 

1885  

I 

Yen 
330  ooo 

Yen 

Yen 
•^o.ooo 

1886  

10 

846,000 

234.  458 

612.541 

1887.  . 

7 

OQ5.Q4O 

6s  5  O4O 

^4.0.000 

1888  

2 

8  SO  60  1 

8O4  0^4 

CA  7C7 

1889  

I 

668,640 

668,640 

Total  

21 

3,70I,28l 

2,363,982 

1,337,298 

•  Converted  for  the  purpose  of  making  the  final  account  of  the  unredeemed  sum 
of  each  fiscal  year. 

For  the  redemption  of  the  said  Temporary  Loan,  a  sum  of 
191,042.656  yen  was  paid  each  fiscal  year,  and  thus  the  whole 
debt  was  paid  off  during  the  period  ranging  from  1886  to  1893. 


WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 


CONCLUSION 

The  above  is  a  summary  of  the  war  and  armament  loans 
floated  by  our  Financial  Department  during  the  period  from 
the  Satsuma  Rebellion  to  the  Sino-Japanese  War. 

The  war  and  armament  loans  during  this  period,  therefore, 
include  the  Loan  for  the  Suppression  of  the  Rebellion,  in- 
creased issue  of  New  Paper  Money,  Navy  Loan,  Temporary 
Loan  for  Expenditures  on  New  Style  Rifles  for  Army  Use  and 
for  Ammunition  Manufacture,  and  Temporary  Loan  for  the 
Redemption  of  Paper  Money.  The  following  tables  show 
these  under  the  main  division  of  war  loans  and  armament  loans : 

I. — AMOUNT  OF  WAR  LOANS 


Year 

Temporary  Loan 
for  the  Suppression 
of  the  Rebellion 

New  Paper 
Money 

Temporary  Loan 
for  the  Withdrawal 
of  Paper  Money 

Total 

1877.  . 

Yen 
0,4.86,000 

Yen 

Yen 

Yen  • 
9,486,000 

1878.. 

S.SI4..OOO 

27,000,000 

^2,  5  1  4.OOO 

1890  

22,000,000 

22,OOO,OOO 

Total 

I5,OOO,OOO 

27,000,000 

22,OOO,OOO 

64,OOO,OOO 

II. — AMOUNT  OF  ARMAMENT  LOANS* 


Year 

Navy  Loan 

Temporary  Loan  for  the 
Expenditure  on  New  Style 
Rifle  and  Ammunition 

Total 

1  88s.  . 

Yen 

Yen 
^to.ooo 

Yen 

l^O.OOO 

1886  

5,000  ooo 

6I2.S4I 

5.6I2.S4I 

1887.  . 

6,000,000 

^4.O,OOO 

6,^4O,OOO 

1888  

2,000,000 

S4,7e>7 

2.OS4.7S7 

1  889  .  . 

4,000,000 

4,OOO,OOO 

Total  .... 

17,000,000 

1,337,298 

18,337,298 

Although  the  above  loans  were  adequate  to  meet  all  the  war 
and  armament  expenditures  during  and  after  the  Satsuma 
Rebellion,  the  public  loans  generally  floated  during  the  same 
period  were  not  restricted  to  the  above.  In  1878  a  loan  for  the 

1  Based  on  Financial  History  of  Meiji  Era. 


SATSUMA   REBELLION   TO    SINO-JAPANESE   WAR  39 

encouragement  of  industries  amounting  to  12,500,000  yen  was 
issued.  In  1884  and  1885,  there  was  the  issue  of  the  Naka- 
sendo  Railway  Loan  amounting  to  20,000,000  yen.  In  1884, 

1885  and  1886  there  was  the  issue  of  a  revised  unregistered 
Kinsatsu  Exchange  Loan  amounting  to  7,939,900  yen.     In 

1886  a  railway  expenditure  replenishment  loan  amounting  to 
2,000,000  yen  was  floated.     Thus  the  national  loans  of  the 
Empire,  together  with  the  paper  money,  greatly  increased 
both  in  their  kinds  and  amounts.     The  government,  therefore, 
carried  on  the  readjustment  of  paper  money,  established  a 
conversion  system  and  improved  the  monetary  circulation. 
When  the  rate  of  interest  had  remarkably  fallen  by  these  expe- 
dients, the  government  attempted  an  adjustment  of  various 
public  loans  after  1886.    This  was  carried  through  by  Imperial 
Ordinance  No.  66,  October,   I886.1     This  public  loan  was 
issued  to  convert  the  domestic  loans  upward  of  6  per  cent 
interest  (such  as   "Kinsatsu,"   Nakasendo  Railway  Bonds, 
"Kinsatsu"  Exchange  Bonds  and  Loans  for  the  Encourage- 
ment of  Industries,  etc.,  amounting  to  175,233,340  yen)  into  a 
loan  with  not  higher  than  5  per  cent  interest,  or  to  redeem 
the  same  with  cash.     This  loan  was  issued  during  the  period 
1887-1897,  the  total  sum  amounting  to  175,000,000  yen.    Thus 
the  program  of  the  consolidation  of  national  loans  was  steadily 
carried  on.     In  1890,  the  Imperial  constitution  was  put  into 
operation.     At  the  end  of  the  same  year,  the  Imperial  Diet 
was  convened  and  the  various  financial  adjustments  were  car- 
ried on.     In  accordance  with  Law  No.  4,  1892,2  a  5  per  cent 
railway  loan  was  issued  beginning  with  1893,  the  object  being 
the  extension  of  government  railway  lines  during  the  coming 
twelve  years,  with  the  sum  of  60,000,000  yen. 

The  above  is  a  summary  of  the  public  debts  of  Japan  prior 
to  the  Sino-Japanese  War.  We  have  added  the  summary  be- 
fore we  proceed  to  the  discussion  of  the  war  and  armament 
loans  on  account  of  the  Sino-Japanese  War,  in  order  to  show 
the  condition  of  our  state  liabilities  when  Japan  and  China 
came  into  conflict. 

1  Consolidated  Loans  Regulation. 

2  Construction  of  Railways  Loan  Regulation. 


CHAPTER  IV 

FROM  THE  SINO-JAPANESE  WAR  TO  THE  RUSSO- 
JAPANESE  WAR 

Our  declaration  of  war  against  China  was  proclaimed  on 
August  I,  1894.  The  Sino-Japanese  War,  however,  com- 
menced in  June,  1894,  when  Japanese  and  Chinese  troops  were 
both  dispatched  to  Korea.  The  twenty-two  months,  from 
June  i,  1894,  to  March  31,  1896,  formed  one  fiscal  year  for  the 
war  expenses.  The  revenue  and  the  expenditure  during  this 
period  were  estimated  at  250,000,000  yen,  but  the  actual  out- 
put did  not  exceed  200,475,508  yen.  Of  this  figure,  164,520,- 
371  yen  was  disbursed  by  the  Military  Department,  while 
35,955,137  yen  was  disbursed  by  the  Navy  Department. 

The  actual  receipt  of  revenue  to  meet  this  expenditure 
amounted  to  225,230,127  yen,  and  thus  there  was  a  surplus  of 
24,754,619  yen.  This  surplus  sum  was  transferred  to  the 
general  account  for  the  fiscal  year  1896,  together  with  the  fund 
for  meeting  the  miscellaneous  needs  concerning  the  war,  which 
were  yet  to  be  met.  Besides,  the  extraordinary  expenditure 
connected  with  the  war  in  the  general  account  amounted  to 
32,134,262  yen. 

At  the  commencement  of  the  war,  however,  it  was  impos- 
sible for  the  government  to  foresee  the  duration  and  the  ex- 
penses of  the  war,  and  the  war  fund  was  not  fixed  from  the 
beginning.  The  government,  therefore,  met  the  situation  by 
the  outlay  of  the  surplus  fund  of  the  national  Treasury,  by  the 
diversion  of  the  special  accounts  funds,  by  loans  from  the 
Bank  of  Japan,  and  by  the  issue  of  military  bills.  These  were 
finally  readjusted  by  public  loans,  by  the  indemnity  fund  and 
out  of  other  resources. 

When  the  Korean  affair  occurred,  the  government  resorted 
to  the  second  reserve  fund  of  the  general  account  of  the  fiscal 
year  1894-1895,  which,  however,  was  not  adequate  to  meet 
40 


SINO-JAPANESE   WAR  TO   RUSSO-JAPANESE  WAR  4! 

the  needs  of  the  situation.  Thereupon,  the  government  ob- 
tained the  Imperial  sanction  to  employ  the  surplus  fund  of  the 
national  Treasury.  The  Korean  affair  gave  rise  to  the  con- 
flict between  Japan  and  China,  and  to  the  dispatch  of  our 
troops,  and  finally  to  the  declaration  of  war  in  August,  1894. 
The  need  for  the  war  expenses  became  more  and  more  im- 
minent. 

By  Imperial  Ordinance  No.  143,  August  13, 1894,  the  govern- 
ment was  authorized  "to  transfer  and  use  the  fund  belonging 
to  the  special  account,  to  make  temporary  loans,  and  to  float 
public  loans  in  order  to  meet  the  expenditures  of  the  Korean 
affair."  By  Imperial  Ordinance  No.  144,  August  15,  1894 
(War  Loan  Regulation)  the  flotation  of  loans  to  the  amount  of 
50,000,000  yen  was  ordered.  In  October,  1894,  DY  Law  No. 
25,  the  flotation  of  loans  to  the  amount  of  100,000,000  yen  was 
proclaimed  with  the  consent  of  the  seventh  special  session  of 
the  Diet  convened  at  Hiroshima.  In  the  eighth  session  of  the 
Imperial  Diet  a  draft  relating  to  the  flotation  of  public  loans 
amounting  to  100,000,000  yen  met  its  approval,  and  was 
promulgated  on  March  2,  1895.  When  the  flotation  of  public 
loans  to  the  amount  of  100,000,000  yen  had  been  approved  at 
the  seventh  special  session  of  the  Diet,  it  was  decided  that 
20,000,000  yen,  which  was  the  remainder  of  the  sum  to  be 
floated  in  accordance  with  Imperial  Ordinance  No.  144,  1895, 
should  not  be  floated. 

Therefore,  the  total  sum  which  the  government  obtained  in 
the  form  of  public  loans  or  of  temporary  loans  was  230,000,000 
yen.  Of  this  sum,  the  war  loans  actually  floated  and  issued  to 
the  end  of  March,  1896,  amounted  to  119,000,000  yen  in  round 
numbers.  At  the  end  of  the  fiscal  year  1898  it  amounted  to 
124,835,750  yen. 

Thus,  the  public  loan  actually  floated  was  smaller  than  the 
estimated  sum,  and  this  can  be  accounted  for  by  the  fact  that  a 
readjustment  was  accomplished  with  the  indemnity  fund  and 
other  revenues,  which  redeemed  the  sums  diverted  from  the 
special  accounts  funds,  loans  from  the  Bank  of  Japan,  and 
military  bills  and  the  like.  Diversion  from  the  special  ac- 


42         WAR   AND   ARMAMENT   LOANS:   HISTORICAL    SURVEY 

counts  funds  constantly  took  place  during  the  war  beginning 
with  October,  1894,  the  sum  diverted  amounting  to  26,710,462 
yen  at  the  end  of  March,  1896.  Loans  from  the  Bank  of  Japan 
were  constantly  incurred  during  the  war,  and  at  the  end  of 
March,  1896,  these  equalled  37,900,000  yen.  Military  bills 
were  issued  to  the  amount  of  3,780,000  yen  in  March,  1895, 
but  subsequent  to  July  of  the  same  year,  these  were  gradually 
redeemed,  and  by  the  end  of  March,  1896,  had  been  reduced  to 
103  yen. 

The  sum  transferred  from  the  indemnity  fund  to  the  extra- 
ordinary war  expenditures  special  account,  for  purposes  of  ex- 
tinguishing the  above  temporary  loans  before  the  final  account 
of  that  fiscal  year,  amounted  to  78,950,000  yen  in  round  num- 
bers. With  the  addition  of  the  voluntary  contribution  made 
by  the  people  for  war  expenses  and  for  the  relief  of  soldiers, 
this  special  account  formed  the  war  fund,  out  of  which  the 
entire  sum  of  the  extraordinary  war  expenses  was  defrayed. 

In  short,  the  total  expenditures  of  the  Sino-Japanese  War 
according  to  the  final  account  were  200,475,508  yen,  and  the 
war  fund  for  meeting  this  sum  was  raised  by  the  following 
methods : 

Yen 

Surplus  fund  of  the  national  Treasury  in  the  fiscal  year  1893 23,439,086 

Fund  obtained  by  public  loans 1 16,804,926 

Voluntary  contribution  for  war  fund 160,800 

Voluntary  contribution  for  relief  fund 2,788,740 

Miscellaneous  income I>5I9i3°5 

Income  in  the  occupied  territories 624,425 

Income  in  Formosa  and  Pescadores  Islands 935.679 

Transferred  from  the  special  (indemnity)  fund 78,957,164 

Total 225,230,1 19 

Thus,  there  was  a  surplus  of  24,754,619  yen  transferred  to 
the  general  account  in  accordance  with  Law  No.  10,  1896, 
which  was  employed  for  miscellaneous  expenses  in  connection 
with  the  war. 

Of  all  the  postbellum  undertakings  the  expansion  of  arma- 
ment occupied  the  most  conspicuous  position,  but  its  re- 
sources were  sought  not  in  the  public  loans,  but  mostly  in  the 
indemnity  fund. 


SINO-JAPANESE   WAR  TO   RUSSO-JAPANESE   WAR  43 

The  plan  of  the  expansion  of  armament  for  the  coming  ten 
years  was  decided  in  1896,  but  subsequently  this  plan  was 
further  expanded  several  times.  The  actual  total  of  the  ex- 
penditures till  1905  was  318,137,458  yen,  of  which  106,487,- 
336  yen  was  appropriated  to  the  expansion  of  the  army,  and 
211,650,116  yen  to  that  of  the  navy.  The  resources,  in  yen, 
for  this  sum  were  chiefly  the  indemnity  fund,  but  public  loans 
and  ordinary  revenue  were  also  resorted  to. 

Defrayed  out  of  indemnity  fund 196,058,025 

"  public  loans 77,168,702 

"     "  ordinary  revenue 44,910,731 

Total 318,137,458 

With  regard  first  to  disbursements  out  of  the  indemnity 
fund,  it  was  provided  by  Law  No.  6,  March,  1896^  that  bank 
notes  should  be  borrowed  from  the  Bank  of  Japan  on  deposit  of 
gold  bullion  which  was  still  abroad.  The  amount  of  these 
loans  figured  up  to  99,844,700  yen  during  the  years  1896, 
1897,  1898.  These  loans  were  called  temporary  loans  on  de- 
posit of  the  indemnity  money.  Secondly,  with  regard  to  the 
disbursement  out  of  public  loans  it  was  stipulated  by  Law  No. 
59,  March,  1896,2  that  a  part  of  the  public  undertakings  loan 
should  be  appropriated  to  the  expansion  of  armament. 

For  several  succeeding  years  postbellum  arrangements  were 
duly  carried,  including  the  establishment  of  the  gold-standard 
system,  the  expansion  of  railways  and  telephone  services,  the 
encouragement  of  industries  and  education,  the  government 
iron  enterprise  and  the  governmental  monopolies,  in  addition 
to  armament  expansion;  until,  in  1900,  occurred  the  Boxer  Up- 
rising in  China,  which  endangered  to  no  small  extent  the  life 
and  property  of  all  the  alien  residents  in  China.  After  consul- 
tation with  England  and  other  powers,  our  government  decided 
to  send  the  Fifth  Division  for  its  suppression.  This  was  what 
is  called  the  North  China  affair. 

The  expenditures  in  connection  with  the  North  China  affair 
amounted  to  22,815,091  yen  in  the  fiscal  year  1900,  and 

1  Special  Account  Law  with  regard  to  indemnity. 

1  Regulation  with  regard  to  public  undertakings  loan. 


44        WAR  AND  ARMAMENT  LOANS:   HISTORICAL   SURVEY 

12,828,710  yen  in  1901,  totaling  35,243,801  yen.  To  meet  this 
outlay  the  government  in  the  first  place  resorted  to  2,000,000 
yen  from  the  reserve  fund  of  the  general  account.  Then,  by 
the  Imperial  Urgency  Ordinance  No.  277,  June,  1900,  it  re- 
sorted to  20,000,000  yen  from  the  replenishment  fund  for  war- 
ships and  torpedo  boats,  which  had  been  specially  set  apart  out 
of  the  indemnity.  The  uprising  was  not  easily  suppressed, 
and  the  expenses  incurred  in  dispatching  troops  and  warships 
showed  rapidly  increasing  figures.  In  the  fiscal  year  1901,  it 
was  incumbent  upon  the  government  not  only  to  seek  some 
sources  of  revenue  for  the  above-mentioned  12,800,000  yen  in 
round  numbers,  but  also  in  order  that  the  20,000,000  yen 
which  had  been  transferred  from  the  aforesaid  fund  should  be 
speedily  replenished.  But  the  conditions  of  the  market,  both 
domestic  and  foreign,  were  such  that  the  raising  of  public 
loans  was  quite  out  of  the  question.  Thereupon,  the  govern- 
ment could  find  no  alternative  but  the  increase  of  taxes. 

In  the  fifteenth  session  of  the  Diet,  1901,  laws  were  passed 
for  the  increase  of  the  sake  tax,  for  the  creation  of  beer  and 
sugar  taxes,  for  the  raising  of  the  rate  of  monopoly  prices  for 
leaf-tobacco,  and  for  the  increase  of  customs  duties  on  alcohol, 
oil,  and  tobacco.  The  increase  in  revenue  resulting  from  these 
new  taxes  and  increased  rates  were  estimated  at  21,440,758 
yen.  It  was  planned  that,  after  the  war  expenses  had  been 
met,  the  remainder  should  be  appropriated  to  the  replenish- 
ment of  the  funds,  and  then  to  the  public  undertakings  ex- 
penditures, which  were  to  be  covered  out  of  public  loans. 
Contrary  to  the  expectations,  however,  the  actual  receipt  in 
the  fiscal  year  1901  was  only  4,328,925  yen,  and  the  actual 
receipt  in  1902  was  no  more  than  16,076,128  yen.  As  it  was 
clear  that  the  increase  was  inadequate  even  to  cover  the 
expenses  of  war,  the  government  contracted  temporary  loans 
amounting  to  15,000,000  yen  from  the  Bank  of  Japan  begin- 
ning with  October,  1901.  These  were  called  Temporary 
Loans  for  Chinese  Affair  Expenditures. 

To  sum  up,  the  public  loans  with  regard  to  war  and  arma- 
ment during  and  after  the  Sino-Japanese  War  consisted  of 


SING-JAPANESE  WAR   TO   RUSSO-JAPANESE   WAR  45 

military  loans,  a  part  of  the  public  undertakings  loans,  and 
various  kinds  of  temporary  loans. 

MILITARY  LOANS 

In  accordance  with  the  regulations  promulgated  during  1894 
and  1895,  a  military  loan  not  exceeding  the  total  amount  of 
230,000,000  yen  was  authorized  to  be  floated  to  meet  the  needs 
of  the  military  outlays  in  connection  with  the  Korean  and 
Chinese  affairs.  The  nominal  amount  floated  or  issued  was 
125,000,000  yen  in  round  numbers  (124,920,750  yen).  Inas- 
much as  the  regulations,  the  methods  and  dates  of  issue  were 
different  one  from  another,  we  deem  it  proper  and  convenient 
to  divide  it  into  the  following  three  issues: 

(i)  The  flotation  of  the  first  military  loan  was  authorized 
by  Imperial  Urgency  Ordinance  No.  143  and  Imperial  Ordi- 
nance No.  144.  These  provided  that  the  amount  should  not 
exceed  50,000,000  yen,  that  the  interest  should  not  exceed  6 
per  cent,  and  that  the  repayment  should  be  within  fifty  years 
after  remaining  unredeemed  for  five  years.  Accordingly, 
when  it  was  actually  floated  by  Notification  No.  32  of  the 
Finance  Department,  on  August  17, 1904,  the  amount  was  fixed 
at  30,000,000  yen,  with  interest  at  5  per  cent,  and  the  methods 
of  both  par  subscription  and  premium  issue  were  resorted  to. 
Payment  in  seven  instalments  was  authorized  for  the  conven- 
ience of  subscribers,  and  the  payment  was  to  be  fully  completed 
by  June  30,  1895.  Now  to  float  a  loan  figuring  up  to  30,000,- 
ooo  yen  at  one  time  was  a  thing  quite  unprecedented  in  our 
history.  It  was  quite  natural  that  some  persons  should  have 
entertained  a  doubt  as  to  the  success  of  the  flotation.  The 
government,  therefore,  kept  this  point  ever  in  view,  and  did 
its  best  to  encourage  subscriptions  by  sending  private  direc- 
tions to  the  local  authorities  and  by  giving  instructions  to  the 
bankers.  It  was  rather  a  surprise  to  everybody  to  find  that 
the  response  amounted  to  77,002,650  yen,  exceeding  the  sum 
invited  by  47,002,650  yen.  Thereupon,  the  government  ac- 
cepted 11,627,850  yen,  applied  for  at  a  premium,  and  18,372,- 
1 50  yen  responded  to  at  par.  Among  the  subscription  prices 


46        WAR   AND   ARMAMENT   LOANS  I   HISTORICAL    SURVEY 

of  this  loan  the  highest  was  142.44  yen,  which  was  followed  by 
other  high  prices,  such  as  125  yen,  120  yen,  etc.  Such  a  re- 
sponse was  quite  unexampled. 

At  that  time  the  tightness  of  monetary  circulation  was  in- 
creasing, and  the  quotation  of  5  per  cent  national  loan  bonds 
was  below  par  in  the  market.  It  was  wholly  due  to  the 
patriotic  nature  of  the  loan,  which  appealed  to  the  loyalty  of 
the  nation,  that  the  flotation  of  the  first  military  loan  at  such  a 
time  received  such  an  unheard-of  response. 

(2)  The  flotation  of  the  second  military  loan  was  authorized 
by  Law  No.  25,  October  23,  1894,  and  by  Imperial  Ordinance 
No.  137,  October,  1895.  This  flotation  can  be  divided  into  the 
public  subscription  and  delivery  issues. 

The  public  subscription  was  authorized  by  Law  No.  25, 
October,  1894,  DY  which  the  raising  of  funded  loans  or  tempo- 
rary loans  not  exceeding  100,000,000  yen,  with  interest  not 
exceeding  7  per  cent,  was  authorized.  The  actual  amount  to 
be  subscribed,  the  rate  of  interest,  and  the  method  of  issue 
were  laid  down  by  Finance  Department  Order  No.  15,  by 
which  50,000,000  yen,  with  interest  at  5  per  cent,  was  raised 
from  the  public  at  large.  What  is  called  the  delivery  issue 
originated  in  Imperial  Ordinance  No.  137,  October,  1895,  by 
which  it  was  provided  that  Imperial  grants  of  money,  which 
were  to  be  made  in  connection  with  the  Sino-Japanese  War, 
could  be  made  with  military  loan  bonds  at  the  convenience 
of  the  grantees.  Its  issue  was  limited  to  10,000,000  yen,  with 
interest  at  5  per  cent,  by  Financial  Department  Order  No.  3, 
and  the  bonds  were  to  be  gradually  delivered. 

The  provisions  of  Law  No.  25,  October,  1894,  were  to  be  ap- 
plied with  necessary  modifications  to  the  above-mentioned  two 
kinds  of  military  loans,  as  far  as  redemption,  payment  of  in- 
terest and  other  details  were  concerned.  In  accordance  with 
Finance  Department  Order  No.  40,  November,  1894,  5°>oo°»- 
ooo  yen  was  subscribed  by  public  subscription  with  95  yen  as 
the  minimum  subscription  price.  The  payment  of  this  sum, 
together  with  that  of  the  guaranty  money,  was  divided  into 
seven  instalments,  and  June  30,  1895,  was  fixed  as  the  final 


SING-JAPANESE  WAR   TO   RUSSO-JAPANESE  WAR  47 

date  of  payment.  The  subscribed  amount  of  the  first  mili- 
tary loan,  30,000,000  yen,  was  then  in  course  of  payment. 
Money  circulation  was  becoming  tight  day  by  day.  A  new 
subscription  amounting  to  50,000,000  yen,  therefore,  must 
needs  be  at  as  high  a  rate  of  interest  as  the  law  permitted. 
Five  per  cent,  however,  was  a  well-established  principle  in  the 
case  of  our  public  loans.  In  view  of  the  future  consolidation 
of  national  liabilities,  the  government  regarded  it  as  more 
expedient  to  issue  public  loans  at  a  lower  price,  and  to 
maintain  a  uniform  rate  of  interest,  than  to  float  a  new  loan 
with  interest  at  6  per  cent.  This  accounts  for  the  adoption  of 
the  method  of  the  subscription  below  par.  The  division  of 
payment  into  seven  instalments,  fixing  the  last  date  of  pay- 
ment on  June  30,  1895  (which  was  the  same  date  as  that  of  the 
first  subscription),  was  chiefly  to  simplify  its  treatment.  But 
notice  was  taken  of  the  amount  required  to  meet  the  ex- 
traordinary war  expenditures  and  the  actual  condition  of  our 
economic  world. 

One  point  worthy  of  special  notice  in  this  connection  was 
the  method  of  its  issue.  By  the  application  of  the  proviso  of 
Article  7  of  the  Consolidated  Public  Loan  Regulation,  the 
government  enabled  all  the  applicants  for  less  than  200  yen  to 
become  subscribers.  This  measure  was  to  induce  men  of 
moderate  means  to  convert  small  savings  into  government 
bonds,  which  would  interfere  less  with  the  monetary  circu- 
lation than  the  withdrawal  of  floating  capital.  Moreover, 
people  of  small  means  would  in  this  way  be  taught  that  the 
national  loan  was  a  reliable  mode  of  investment,  and  thus  it 
would  prove,  it  was  thought,  an  encouragement  of  thrifty 
habits.  Moreover,  it  was  feared  that  unless  this  method  was 
adopted,  the  patriotic  responses  from  men  of  moderate  means 
must  be  rejected  and  their  hopes  frustrated,  in  case  the 
amount  subscribed  figured  to  an  immense  sum.  As  this  sub- 
scription was  made  after  the  lapse  of  only  three  -months  from 
the  first  one,  the  government  entertained  a  fear  as  to  its  out- 
come. Therefore,  as  in  the  case  of  the  previous  subscription, 
it  gave  private  directions  to  the  local  authorities  and  instruc- 


48        WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 

tions  to  the  bankers.  At  the  end  of  the  term  the  total  amount 
reached  as  much  as  90,301,300  yen,  exceeding  the  sum  invited 
by  40,301,300  yen.  The  subscription  price  bore  no  compari- 
son with  that  of  the  first,  but  still  the  highest  was  120  yen. 
Of  the  amount  responded  to,  22,119,850  yen  was  allotted  out 
of  the  premium  subscription  and  7,924,000  yen  out  of  sub- 
scriptions of  less  than  200  yen.  Adding  to  these  19,956,150 
yen  allotted  in  ratio  out  of  par  subscriptions,  the  total  sum 
came  to  50,000,000  yen. 

The  year  was  then  approaching  its  end,  with  increasing 
tightness  of  monetary  circulation,  and  the  quotations  of  5  per 
cent  national  loan  bonds  were  steadily  falling.  Such  a  re- 
markable success  in  the  face  of  these  distressing  circumstances 
is  to  be  ascribed  partly  to  the  perfect  method  of  subscription. 
But  its  chief  cause  lay  in  the  character  of  the  loan,  which  ap- 
pealed to  the  patriotic  feeling  of  the  nation. 

(3)  The  flotation  of  the  third  military  loan  was  authorized 
by  Law  No.  8,  March,  1895,  which  read  as  follows: 

In  order  to  meet  the  military  expenditures  of  the  North  China  affair,  a  further 
flotation  of  public  loans  not  exceeding  100,000,000  yen,  with  interest  not  exceeding 
6  per  cent  per  annum,  shall  be  allowed. 

This  was  carried  into  effect  only  after  March  of  the  following 
year.  The  amount  did  not  exceed  35,000,000  yen,  including 
both  general  subscription  and  special  issue. 

General  subscription,  which  amounted  to  10,000,000  yen, 
was  raised  by  Finance  Department  Order  No.  2,  March,  1896. 
But  the  results  were  far  from  being  satisfactory,  and  the 
greater  part  had  to  be  put  to  special  issue.  As  for  the  re- 
maining 25,000,000  yen,  which  was  to  be  issued  next,  special 
issue  was  chosen  from  the  beginning,  by  Finance  Department 
Order  No.  4,  March,  1896.  The  interest  for  both  bonds  was 
6  per  cent  per  annum.  The  provisions  of  the  Consolidated 
Loan  Regulation  above  mentioned  were  likewise  to  be  applied 
with  the  necessary  modifications  with  regard  to  the  interest, 
the  payment,  and  the  redemption. 

As  for  the  10,000,000  yen,  which  was  to  be  raised  by  gen- 
eral subscription,  it  was  provided  by  Finance  Department 


SINO-JAPANESE  WAR  TO   RUSSO-JAPANESE  WAR  49 

Order  No.  13,  of  the  same  date,  that  the  final  date  of  pay- 
ment should  be  October  31,  1896,  that  the  minimum  amount 
of  subscription,  the  rate  of  security  money,  and  other  minor 
procedural  provisions  should  be  similar  to  those  of  the  first 
issue.  The  response,  however,  to  this  call  was  by  no  means 
gratifying.  The  total  sum  which  was  tendered  by  March  2 1 , 
the  final  date  of  application,  at  the  Bank  of  Japan  and  its 
branches  and  agencies,  was  estimated  at  the  meager  sum  of 
1,578,050  yen.  Applications  above  issue  par  were  1,026,850 
yen,  and  applications  at  the  issue  par  551,200  yen,  and  even 
the  highest  price  did  not  exceed  103  yen.  Realizing  that  the 
condition  of  the  market  forbade  any  further  subscription,  the 
government  was  obliged  to  cause  the  Deposit  Section  of  the 
Finance  Department  to  subscribe  5,000,000  yen  out  of  the  re- 
maining 8,500,000  yen,  and  to  give  directions  to  the  Bank  of 
Japan  to  subscribe  3,421,950  yen. 

In  short,  the  sum  intended  to  be  raised  in  the  third  subscrip- 
tion was  realized  by  resorting  to  the  accommodation  of  the 
Deposit  Section  and  the  subscription  of  the  Bank  of  Japan. 
What  could  have  been  the  cause  of  such  a  great  contrast  be- 
tween the  unparalleled  success  of  the  two  preceding  flotations, 
and  the  utter  failure  of  the  present  subscription?  Probably 
the  latter  was  due  to  the  sudden  expansion  of  business  as  a 
corollary  to  our  victory,  which  latter  gave  rise,  in  the  minds  of 
the  people,  to  anticipation  of  the  rise  of  various  enterprises, 
thus  bringing  about  the  stringency  in  monetary  circulation. 
It  was  also  due  to  the  cooling  down  of  warlike  feelings  on  the 
part  of  the  nation  at  the  cessation  of  hostilities.  The  failure 
which  attended  the  subscription  of  10,000,000  yen  convinced 
the  government  that  the  same  method  was  no  more  available 
for  the  further  sum  required,  viz.,  25,000,000  yen.  Therefore, 
it  had  to  have  recourse  to  the  method  of  special  issue  from  the 
first  by  Finance  Department  Order  No.  3,  March,  1896,  mak- 
ing the  Deposit  Section  of  the  Finance  Department  subscribe 
it.  Thus,  the  issue  of  the  military  loan  was  completed  by 
three  subscriptions  and  two  special  issues.  As  regards  the 
three  subscriptions,  there  was  a  discrepancy  between  the 


5O       WAR   AND   ARMAMENT   LOANS:      HISTORICAL   SURVEY 


amount  of  flotation  and  the  net  proceeds,  and  these  three 
were  different  in  other  minor  poin-ts. 

The  following  shows  the   comparative  statistics   of  these 
three  subscriptions: 


SUBSCRIPTIONS  TO  MILITARY  LOAN1 


Items 

First 

Second 

Third 

Total  or 
Average 

Amount  subscribed  

Yen 
77,oo2,6so 

Yen 

QO  ^OI.'IOO 

Yen 

10  OOO  OOO 

Yen 

177  W\  QSO 

Minimum  price  of  subscription 
Amount  of  flotation 

100,000 
30  ooo  ooo 

95,000 
50  ooo  ooo 

100,000 

I  O  OOO  OOO 

98,333 

90  ooo  ooo 

Amount    of     subscription    at 
minimum  price  

6S,^74-.8OO 

68,181,450 

8  Q71.I  SO 

14.2  S2Q  4.OO 

Amount  of  premium  subscrip- 
tion   

11,627,850 

22,119,850 

1,026,850 

14,774.,  SSO 

Net  proceeds  

•u),o6i,^7i 

47,618,  851 

10,001,257 

87,701,4.81 

Excess  •  

4.7,  002,  6  so 

AO.^OI.^OO 

87,^O^  Q^O 

Maximum  price  of  subscription 
Average  price  allotted  

142.440 
100.217 

1  20.000 

QS  280 

103.000 
100.013 

121.813 

07  4.SI 

The  number  of  subscriptions  for  the  first  issue  was  1 19,015 ; 
for  the  second,  173,051;  for  the  third,  2,160,  making  a  total 
of  294,226.  The  total  receipts  in  yen,  including  the  three  sub- 
scriptions and  the  two  special  issues,  were  as  follows: 

Net  proceeds  of  the  general  subscriptions  to  military  loan 87,710,7952 

Amount  of  the  special  issues 35,000,000 

Total 122,710,795 


Amount  of  flotation 124,920,750 

Such  were  the  amount  of  flotation  and  the  net  proceeds  of 
the  military  loan,  which  was  duly  floated,  in  contrast  with  an 
estimate  of  250,000,000  yen,  which  the  government  had  for- 
mulated. Comparing  this  total  with  116,804,926  yen,  which 
was  the  amount  of  public  loans  mentioned  in  connection  with 
the  war  fund,  we  find  a  discrepancy  between  them.  This  is 
due  to  the  fact  that  the  calculation  of  the  war  fund  was  finally 

1  The  amount  subscribed,  and  the  net  proceeds  in  the  third  flotation,  include 
the  amount  subscribed  by  the  Deposit  Section  of  the  national  Treasury  (5,000,000 
yen)  and  the  amount  subscribed  by  the  Bank  of  Japan  (3,421,950  yen) 

1  Includes  overdue  interest  (7,313  yen)  due  to  the  delay  of  payment. 


SINO-JAPANESE   WAR   TO   RUSSO-JAPANESE  WAR  51 

settled  on  March  31,  1896,  while  the  final  account  of  the  net 
proceeds  mentioned  above  was  taken  at  the  end  of  the  fiscal 
year  1905. 

PUBLIC  UNDERTAKINGS  LOAN 

The  Public  Undertakings  Loan,  issued  in  accordance  with 
the  Public  Undertakings  Loan  Regulation,  Law  No.  59,  1896, 
was  in  the  beginning  estimated  at  135,000,000  yen.  This  in- 
cluded expenditures  (i)  for  the  improvement  of  government 
railways,  (2)  for  the  construction  of  the  Sorachifuto  Asahigawa 
line  in  Hokkaido,  (3)  for  the  extension  of  telephone  exchanges, 
and  (4)  for  the  leaf  tobacco  monopoly  fund,  the  total  sum  of 
which  amounted  to  54,025,062  yen  in  round  numbers.  But 
(5)  by  far  the  largest  amount  was  appropriated  to  the  ex- 
penditure for  the  navy  expansion,  which  figured  at  77,168,703 
yen.  Besides  (6)  there  was  the  expenditure  for  the  establish- 
ment of  the  steel  foundry  to  the  amount  of  4,095,793  yen  in 
round  figures,  which  was  planned  to  accomplish  the  inde- 
pendence in  the  supply  of  arms.  Thus,  two-thirds  of  the  Pub- 
lic Undertakings  Loan  were  employed  for  purposes  of  arma- 
ment. The  above-mentioned  public  loan  regulation  consisted 
of  the  following  three  articles : 

Article  I  directed  the  raising  of  the  face  value  135,000,000  yen  in  order  to  meet 
the  various  public  undertakings  above  noted. 

Article  II  provided  that  the  interest  on  the  debt,  which  should  not  exceed  5 
per  cent  per  annum,  was  to  be  definitely  fixed  at  each  subscription. 

Article  III  stipulated  that  in  case  where  there  was  no  provision  in  this  regula- 
tion to  cover  them,  the  Consolidated  Public  Loans  Regulation,  1886,  should  be 
applied. 

The  Public  Undertakings  Loan  was  to  be  raised  beginning 
with  1896.  The  monetary  conditions  of  the  market  were 
continually  strained,  so  much  so  that  the  5  per  cent  national 
loan  fell  below  its  face  value.  This  loan,  therefore,  whose 
interest  was  legally  fixed  at  not  over  5  per  cent,  had  no  bright 
prospect.  Accordingly,  instead  of  adopting  an  ordinary 
method  of  subscription,  the  government  made  a  special  issue 
during  the  two  fiscal  years  1896  and  1897,  in  accordance  with 
the  expedient  provided  for  in  Article  VI,  paragraph  2,  of  the 


52         WAR   AND   ARMAMENT   LOANS:   HISTORICAL    SURVEY 

Consolidated  Public  Loans  Regulation.  The  government  de- 
livered these  bonds  to  the  Bank  of  Japan ;  they  were  then  pur- 
chased by  the  Deposit  Section  of  the  national  Treasury  to  meet 
the  demands  of  the  various  government  undertakings  expendi- 
tures. In  this  way  the  amount  of  issue  reached  37,900,0003^. 
In  the  next  financial  year  the  Public  Undertakings  Loan  and 
the  Hokkaido  railway  loan,  totaling  in  round  numbers  71 ,000,- 
ooo  yen,  were  to  be  floated.  But  opportunity  even  for  the 
special  issue,  to  say  nothing  of  general  subscription,  did  not 
offer  itself.  Hence,  the  greater  part  of  the  employment  of 
these  various  public  undertakings  expenditures  had  to  be  put 
off  to  the  following  financial  year.  Only  17,107,772  yen  (of 
which  the  amount  that  was  to  be  disbursed  out  of  the  Public 
Undertakings  Loan  was  estimated  at  8,763,265  yen)  was  pro 
tempore  disbursed  out  of  a  fund  belonging  to  the  indemnity 
special  account.  Thus,  not  even  a  single  bond  was  issued  in 
this  financial  year. 

With  the  opening  of  the  following  fiscal  year,  the  govern- 
ment had  no  alternative  but  immediately  to  float  a  public 
loan.  Moreover,  the  annual  allotment  for  the  various  works, 
amounting  to  over  20,960,000  yen,  which  was  to  be  met  by 
public  debts,  had  to  be  raised  in  this  fiscal  year.  Thus,  several 
unsubscribed  public  debts  for  two  fiscal  years,  totalling  100,- 
258,879  yen,  had  to  be  floated  at  the  same  time.  To  make 
matters  worse,  the  monetary  situation  in  the  home  market 
still  presented  no  signs  of  recovery ;  on  the  contrary,  it  became 
more  and  more  strained.  Any  immediate  flotation  of  domestic 
loans  was,  therefore,  out  of  the  question,  and  the  government 
was  thrown  back  upon  was  the  expedient  of  floating  foreign 
loans. 

Hereupon,  the  government  promulgated  Law  No.  101, 
April,  1899,  entitled  "Law  Concerning  Flotation  of  National 
Loans  Abroad."  In  pursuance  of  this  law,  and  in  pursuance 
of  the  public  undertakings  loan  law,  the  railway  construction 
law  and  the  Hokkaido  railway  construction  law,  the  procedure 
with  regard  to  foreign  subscription  was  laid  down  by  Finance 


SINO-JAPANESE   WAR   TO   RUSSO-JAPANESE  WAR 


53 


Department  Order  No.  22  in  May  of  the  same  year.  A  4  per 
cent  foreign  loan  amounting  to  £10,000,000  sterling  was 
negotiated  in  London,  which  was  known  as  the  first  4  per  cent 
sterling  loan.  This  foreign  loan  was  underwritten  by  a 
syndicate  consisting  of  Parr's  Bank,  Hongkong  and  Shanghai 
Bank,  India-Australia-China  Bank,  and  the  Yokohama 
Specie  Bank.  The  Pamua  &  Golden  Hill  Co.  acted  as  inter- 
mediary. It  was  agreed  that  unregistered  sterling  bonds 
should  be  issued,  that  the  repayment  of  principal  and  the  pay- 
ment of  interest  should  be  made  in  London,  that  the  redemp- 
tion should  be  made  within  forty-five  years,  after  the  lapse  of 
ten  years,  during  which  it  was  to  remain  unredeemed.  Its 
issue  price  was  90,  and  the  commission  paid  to  the  syndicate 
was  fixed  at  £400,000.  Therefore,  though  the  face  value, 
£10,000,000,  was  converted  into  97,630,000  yen  in  terms  of 
Japanese  currency,  the  net  proceeds  were  only  87,241,278  yen. 
The  money  thus  raised  was  divided  among  the  three  kinds 
of  public  works  above  mentioned  in  ratio  of  the  respective 
amounts  of  flotation.  The  allotment  of  the  issue  amount  and 
the  amount  to  be  raised  in  the  fiscal  year,  1899,  were  as  follows: 

PUBLIC  UNDERTAKINGS  LOANS,  1899 1 


Loans 

Amount 
of 
Allotment  of 
the  Issue 

Amount  To  Be  Raised  in  the  Fiscal  Year  1899 

Deficit 
Flotation 

Amount 
Brought 
Over  from 
the  Fiscal 
Year  1898 

Amount  to 
be  Raised 
in  1899 

Amount 
to  be 
Increased 

Total 

Railway  loan.  .  . 
Public       under- 
takings loan.  . 
Hokkaido     rail- 
way loan  .... 

Total  

Yen 

17,577,750 

78,052,250 
2,000,000 

Yen 
8,364,813 

70,027,235 
1,000,000 

Yen 
9,212,874 

11,253,978 
1,000,000 

Yen 
63 

87 

Yen 
17,577,750 

81,281,300 
2,000,000 

Yen 
3,229,050 

97,630,000 

97,392,048 

21,466,852 

ISO 

100,859,050 

3,229,050 

1  If  we  compare  the  100,859,050  yen,  which  is  the  total  of  the  amount  to  be  floated 
in  the  fiscal  year  1899,  with  the  100,258,879  yen  which  was  shown  in  another  place 
as  the  amount  still  remaining  unraised,  we  see  that  there  exists  a  difference  of  600,07 1 
yen.  This  is  due  to  the  fact  that  the  figures  shown  elsewhere  make  up  the  sum  in- 
vestigated at  the  time  the  flotation  was  being  commenced,  which  underwent  an 
increase  later  on. 


54        WAR  AND  ARMAMENT  LOANS:   HISTORICAL   SURVEY 

From  the  table  it  is  clear  that  the  foreign  loans  thus  raised 
as  the  public  undertakings  loan  amounted  to  78,052,250  yen. 
Of  this  sum,  the  amount  appropriated  to  the  armament  ex- 
pansion undertakings  was  estimated  at  the  immense  sum  of 
54,947,100  yen.  Of  the  remainder,  possibly  with  exception  of 
the  face  value  of  £900,000  (net  proceeds  in  our  currency 
7,908,050  yen),  which  was  set  apart  for  meeting  the  expendi- 
ture for  the  establishment  of  the  steel  foundry,  the  entire 
amount  was  employed  in  public  works,  such  as  railway  and 
telephone  services. 

Of  the  five  public  undertakings  outside  of  the  armament 
expansion,  the  establishment  of  the  steel  foundry  and  the  im- 
provement of  railways  incurred  increased  expenditure,  which 
called  for  the  revision  of  the  public  undertakings  loan  law. 
Thus  by  Law  No.  2,  1901,  the  authorized  amount  of  flotation 
was  raised  from  135,000,000  yen  to  150,000,000  yen,  which  was 
again  increased  to  175,000,000  yen  by  Law  No.  7,  1903. 

In  conformity  with  these  laws,  the  total  of  the  internal  pub- 
lic undertakings  loan  issued  by  the  end  of  the  financial  year 
1903  reached  76,947,750  yen. 

Besides  these,  the  4  per  cent  foreign  loan  amounted  to  78,- 
052,250  yen.  All  public  undertakings  loans  amounted  to 
155,000,000  yen  (166,880,050  yen  at  the  end  of  1907). 

The  above  public  undertakings  loans  included  two  catego- 
ries of  the  armament  expenditure  and  of  the  other  five  public 
works  expenditure.  They  also  included  within  the  other  five 
items  the  expenses  of  the  steel  foundry  establishment.  If  we 
divide  the  amount  of  national  debts  in  conformity  with  this 
classification,  we  arrive  at  the  following  result: 

Yen 

Expenditure  for  armament  expansion 77,168,702 

Of  the  army 18,169,755 

Of  the  navy 58,998,947 

Expenditure  for  the  establishment  of  steel  foundry 18,622,932 

Total 95.791,634 


Expenditures  for  four  kinds  of  public  works: 

Issue  amount  up  to  1904 69,208,366 

Issue  amount  up  to  1908 71,088,416 


SINO-JAPANESE   WAR  TO   RUSSO-JAPANESE  WAR  55 

We  may  state  in  passing,  that  the  total  disbursement  with 
regard  to  the  establishment  of  the  steel  foundry  came  to  42,- 
988,079  yen  during  the  financial  years  1896-1900.  Besides 
this  sum,  1,608,779  yen  was  defrayed  to  the  steel  foundry  ac- 
count out  of  the  extraordinary  reserve  fund,  838,645  yen  out 
of  the  subsidy  for  raw  materials,  and  1 1,136,670  yen  out  of  the 
expenditure  for  the  replenishment  of  the  capital,  which  came 
to  a  total  of  59,339,204  yen.  The  amount  to  be  disbursed  out 
of  public  undertakings  loans  was,  however,  as  stated  in  the 
above  table. 

TEMPORARY  LOANS  CONCERNING  WAR  EXPENDITURE 

As  to  the  war  expenditures  on  account  of  the  Sino-Japanese 
War  and  the  Chinese  affair,  a  plan  had  been  previously  laid 
down  to  meet  them  with  suitable  resources,  in  accordance  with 
which  they  were  duly  adjusted  in  later  fiscal  years. 

Of  these  sources  of  revenue,  there  were  some  that  did  not 
allow  of  prompt  disbursement,  thus  necessitating  a  recourse  to 
some  temporary  accommodation  elsewhere.  It  was  this  cir- 
cumstance that  gave  rise  to  a  variety  of  temporary  loans  for 
war  expenditure.  As  a  result  of  readjustment,  the  temporary 
loans  disappeared  within  a  few  years,  but  for  the  time  being 
they  proved  to  be  a  heavy  burden  upon  the  national  Treas- 
ury. These  loans  included  temporary  loans  for  the  extraor- 
dinary war  expenditures  concerning  the  Sino-Japanese  War, 
temporary  loan  on  deposit  of  the  indemnity  fund,  and  tempo- 
rary loans  concerning  the  North  China  affair. 

(i)   Temporary  Loan  for  Extraordinary  War  Expenditure 

This  debt  was  contracted  from  the  Bank  of  Japan  at  a  junc- 
ture when  the  war  fund  to  defray  the  extraordinary  war  ex- 
penditure in  connection  with  the  Sino-Japanese  War  could  not 
be  obtained  within  the  time  previously  laid  down.  The  gov- 
ernment was  authorized  to  adopt  this  expedient  by  Law  No. 
25,  1894,  and  by  Law  No.  8,  1895.  This  money  was  borrowed 


WAR   AND   ARMAMENT   LOANS:   HISTORICAL    SURVEY 


gradually  between  November  15,  1894,  and  April  6,  1896,  the 
total  amounting  to  40,760,000  yen',  20,500,000  yen  was  the 
amount  raised  by  the  former  law,  while  20,260,000  yen  was 
obtained  by  the  latter.  The  dates  and  amounts  of  the 
borrowing  are  given  in  the  following  tables : 

TEMPORARY  LOAN  IN  ACCORDANCE  WITH  LAW  No.  25,  1894 


Date  of  Loans 

Amount 

Interest  Rate 

Date  of  Redemption 

Nov.  15,  1894  

Yen 
8  ooo  ooo 

5%  per  annum 

Mar  31    1894 

Nov.  26   1894  

i  500  ooo 

Dec.  10   1894 

3  ooo  ooo 

Dec.   15,  1804.  . 

3,000,000 

Feb.     i,  1895  

2,000,000 

Feb.     6,  1895  

3,000,000 

Total  

20  500  ooo 

TEMPORARY  LOAN  IN  ACCORDANCE  WITH  LAW  No.  8,  1895 l 


Date  of  Loans 

Amount 

Interest  Rate 

Date  of  Redemption 

Nov   14,  1895      

Yen 
2,000,000 
i  ,000,000 
1,500,000 
i  ,000,000 
1,000,000 
i  ,000,000 
1,000,000 
1,000,000 
2,000,000 
i  ,000,000 
i  ,000,000 
1,000,000 
1,000,000 
760,000 
500,000 
1,000,000 
1,000,000 
1,500,000 

6%  per 

annum 

Dec.  3 

Mar.  '• 
June  2 

i,  1895 

i,  1896 
o,  1896 

Dec      2    1895 

Dec      3,  1895  

Dec      9,  1895  

Dec    12    1895      .  . 

Dec.  1  8,  1895  

Dec    25,  1895  

Dec    26,  1895  

Dec    28,  1895 

Jan.   22,  1896  

Feb.  28,  1896  

Mar     5,  1896  

Mar  27    1896    .    . 

Mar  31    1896 

Mar.  31,  1896  

Apr      i,  1896  

Apr      4   1896  

Apr      6   1  896 

Total  

20,260,000 

1  It  will  perhaps  strike  the  reader  as  strange  that  the  date  of  redemption  of  the 
loan  made  on  March  31,  1896  (760,000  yen)  was  fixed  at  March  31,  1896. 
This  was  due  to  the  fact  that  on  the  day  previous  to  the  borrowing,  it  was  pro- 
claimed that  the  redemption  of  the  loan  should  take  place  on  March  31,  and  on 
the  self-same  day  it  was  postponed  till  June  30  of  the  same  year. 


SINO-JAPANESE   WAR   TO    RUSSO-JAPANESE   WAR  57 

(2)   Temporary  Loan  on  Deposit  of  Indemnity  Fund 

As  soon  as  the  receipt  from  China  of  the  indemnity  of  over 
364,000,000  yen  was  fixed  upon,  a  special  indemnity  fund  law 
was  promulgated  by  Law  No.  6,  1896,  which  created  a  special 
account  for  its  receipts  and  outlays.  The  first  outlay  upon 
the  establishment  of  the  special  account  was  the  disbursement 
of  above  78,950,000  yen  as  an  additional  account  of  the  1895 
budget.  The  sum  was  transferred  to  the  war  fund  item  of  the 
special  budget  for  the  extraordinary  war  expenditure.  With 
this  money  was  paid  off  a  portion  of  the  war  expenses,  which 
had  been  temporarily  financed  by  the  diversion  of  various 
special  accounts  and  loans  from  the  Bank  of  Japan.  But 
there  was  only  9,020,000  yen  in  cash  in  the  special  indemnity 
account,  which  fell  short  of  the  sum  required  for  the  outlay 
above  mentioned  by  over  69,030,000  yen.  It  was  therefore 
necessary  to  obtain  specie  from  Great  Britain;  but  the  trans- 
fer of  such  a  large  sum  before  the  close  of  the  financial  year 
1895  was  not  to  be  thought  of.  According  to  the  method  of 
accommodation  which  had  previously  been  provided  in  the 
special  indemnity  account  law  to  meet  such  cases,  the  govern- 
ment procured  a  temporary  loan  from  the  Bank  of  Japan  on 
foreign  deposit  of  the  indemnity  fund  on  and  after  May  16, 
1896.  The  total  sum  thus  advanced  from  that  date  till  April 
29,  1897,  rose  to  70,824,703  yen,  which  was  paid  in  eight  in- 
stalments. This  loan  on  deposit  of  the  indemnity  fund  was 
duly  liquidated  with  the  transfer  of  the  indemnity  money  on 
March  31,  1898. 

In  August,  1898,  gold  coins  and  bullion  which  had  previously 
been  purchased  by  the  Bank  of  Japan  with  a  portion  of  the 
indemnity  exchange  fund,  arrived  in  rapid  succession.  The 
bank,  therefore,  provisionally  paid  them  back  to  the  national 
Treasury,  pending  the  completion  of  the  liquidation.  The 
government  again  deposited  the  specie  in  the  Bank  of  Japan 
to  enable  the  bank  to  keep  it  as  the  specie  reserve  for  converti- 
ble notes.  At  the  same  time,  the  government,  in  order  to 
utilize  the  money  of  the  indemnity  fund  and  also  to  accommo- 


WAR   AND   ARMAMENT   LOANS:   HISTORICAL    SURVEY 


date  the  cash  needs  of  the  national  Treasury,  again  contracted 
debts  on  deposit  of  indemnity  money,  an  operation  which  was 
repeated  six  times  before  November  29  of  the  same  year,  and 
the  amount  of  the  loans  figured  up  to  29,020,000  yen.  This 
loan  may  well  be  called  a  temporary  loan  for  armament  ex- 
pansion, as  armament  expansion  constituted  the  chief  appro- 
priation of  the  indemnity.  This  temporary  loan  was  also  re- 
deemed on  January  31,  1899.  This  kind  of  temporary  loan 
amounted  to  the  sum  total  of  99,844,703  yen;  but  inasmuch  as 
it  disappeared  by  the  adjustment  of  every  fiscal  year,  and  bore 
no  interest  (though  at  the  outset  it  bore  the  low  interest  of  2 
per  cent) ,  it  does  not  properly  partake  of  the  nature  of  public 
loans. 


Date  of  Loans 

Amount 

Date  of  Redemption 

May  20,  1896  

Yen 
50,000,000 

Dec.  31,  1896 

Dec.   1  1  ,  1  896  

6,366,190 

Mar.  31,  1897 

Dec.  23,  1896  

407,685 

Feb.  27.  1807.  . 

1,870,997 

Mar.     5,  1  897  

^,482,  6SS 

Mar.  12,  1897  

2,27^,720 

Mar.  1  6,  1897  

3,190,812 

Apr.  29,  1897  

1,,  2^2,6'^ 

Dec.   31,  1897 

Aug.  13,  1898  

Q.QOO  OOO 

Aug.  31,  1898 

Aug.  26,  1898  

5,500,000 

Nov.  25,  1898 

Sept.  15,  1898  

2,500,000 

Oct.   30,  1898 

Sept.  20,  1898  

3,000,000 

Sept.  24,  1898  

4,000  ooo 

Oct.   31,  1898 

Nov.  29,  1898  

4,120,000 

Jan.   31,  1898 

Total  

99.841,701 

(3)  Temporary  Loans  with  Regard  to  the  North  China  Affair 
As  stated  above,  upon  the  occurrence  of  the  Boxer  Uprising 
in  North  China,  our  government,  in  order  to  meet  the  urgent 
expenditures  of  the  army,  of  diplomacy,  of  communication, 
and  of  postbellum  rewards  and  reliefs,  first  made  an  outlay  of 
the  second  general  reserve  fund,  and  then  employed  the  three 
special  funds  in  accordance  with  Imperial  Ordinance  No.  277. 
But  as  the  disturbance  was  not  brought  to  an  end  until  the 


SINO-JAPANESE   WAR   TO   RUSSO-JAPANESE   WAR 


59 


lapse  of  several  months,  the  government  was  obliged  to  resort 
to  a  temporary  loan  to  cover  the  deficiency  of  resources.  On 
March  27,  1901,  a  government  contract  involving  a  liability 
on  the  part  of  the  national  Treasury  outside  of  the  budget 
estimate  was  authorized.  In  accordance  with  this  authoriza- 
tion, the  government  made  a  contract  for  raising  a  temporary 
loan  to  the  limit  of  17,080,000  yen,  with  interest  not  exceeding 
8  per  cent,  and  the  date  of  repayment  fixed  at  two  years 
later.  The  actual  amounts  thus  borrowed  came  to  15,500,- 
ooo  yen,  and  the  dates  and  amounts  are  shown  as  follows: 


Date  of  Loans 

Amount 

Date  of  Loans 

Amount 

Oct.   30,  1901  

Yen 
500,000 

Dec.  24,  1901  

Yen 
1,500,000 

Nov.    i,          

1,500,000 

"      2^        " 

I  OOO  OOO 

"     26  

1  ,000,000 

"      26,       "      

1  ,000,000 

"       2Q, 

1  ,500,000 

"      27.      " 

2,000,000 

"       30,                

1,500,000 

"      28,      "      ... 

2,000,000 

Dec    21 

"       2\, 

I  ,OOO  OOO 

Total  

15,500,000 

This  kind  of  loan  was  a  temporary  loan  for  war  expenditure, 
and  was  adjusted  and  liquidated  with  the  actual  receipt  of 
the  increased  taxes  prepared  for  the  North  China  affair  ex- 
penditures. 

CONCLUSION 

We  have  explained  in  the  foregoing  sections  the  war  and 
armament  loans  floated  from  the  Sino-Japanese  War  to  the 
Russo-Japanese  War.  Of  the  above,  various  temporary 
loans  were  adjusted  by  public  debts  and  other  revenues.  We, 
therefore,  exclude  them  from  the  following  summary  of  the 
war  and  armament  loans  during  this  period.  The  kinds  and 
amount  of  war  and  armament  loans  are  shown  in  the  following 
table: 


6O        WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 


SUMMARY  OF  WAR  AND  ARMAMENT  LOANS  FROM  SINO- JAPANESE  WAR  TO 
RUSSO-JAPANESE  WAR1 


Fiscal  Year 

War  Loans 
Floated 

Armament 
Loan 

Total 

Establishment  of 
Steel  Foundry  Ex- 
penditure Defrayed 
Out  of  Public  Under- 
takings Loan 

iSos.  . 

Yen 
84,044,000 

Yen 

Yen 
84,044,000 

Yen 

1896  

36,380,000 

36,380,000 

1897.  . 

2,900,000 

16,762,036 

19,662,036 

•*25,9I9 

1898.  . 

1,296,000 

2  <^,T,  1  7,  6^  I 

26,613,631 

I,7O8,27O 

1899.  . 

2^5,750 

18.517,6^ 

i8.75V4.os 

3,OII,OO8 

1900  

65,000 

Q  500,^4.5 

o  655  ^45 

10  137,186 

1901  

7,87'VOO'; 

i,,&7i>.ooTl 

5,852,680 

1902  

1,158.013 

i.^S.Qi1* 

^QO,II7 

190-1  .  . 

I  .O4-4-,  QOQ 

i,o44,qoa 

IQO4..  . 

478,0^ 

478  Q^^ 

IQCK  .  . 

225  277 

225  277 

1906  

1,498,885 

1907.  . 

4-Q 

Total  .  . 

124,920,750 

77,168,702 

202,089,452 

24,924,114 

The  above  shows  the  total  of  the  public  loans  with  regard  to 
war  and  armament  during  the  ten  years  after  the  Sino- 
Japanese  War.  Besides  these,  there  were  also  (i)  railway 
loans,  in  accordance  with  Law  No.  4,  1892  (Railway  Construc- 
tion Law),  the  issue  of  which  was  continued,  (2)  Public  Under- 
takings Loan,  with  regard  to  undertakings  other  than  war  and 
armament,  which  was  issued  after  1897,  (3)  Hokkaido  Railway 
Public  Loan,  in  accordance  with  Law  No.  93,  1896,  (4)  For- 
mosan  Public  Undertakings  Loan,  in  accordance  with  Law 
No.  75,  1900. 

The  sum  of  our  public  debts  at  the  end  of  1903  did  not  ex- 
ceed 582,084,110  yen. 

1  Based  on  Finance  Department  National  Loans  Statistics  and  National  Loans 
Specifications.  With  regard  to  war  loans,  as  the  amount  of  flotation  at  the  end 
of  each  fiscal  year  could  not  be  obtained,  the  figures  at  each  year  end  were  inserted. 
The  figures  above  shown  are  the  amount  of  flotation,  so  they  do  not  agree  either 
with  the  amount  invited,  or  with  the  net  proceeds.  Moreover,  as  they  include 
the  part  transferred  to  the  general  account,  they  do  not  accord  with  the  above- 
mentioned  figures  of  the  war  fund.  The  armament  loans  indicate  the  net  pro- 
ceeds and  actual  outlay,  and  so  do  not  agree  with  the  amounts  of  flotation  as 
tabulated  before. 


CHAPTER  V 

FROM  THE  RUSSO-JAPANESE  WAR  TO  THE 
PRESENT  DAY 

The  Russo-Japanese  War  commenced  with  the  battle  of 
Chemulpo,  February  6,  1904,  and  was  terminated  with  the 
conclusion  of  the  treaty  of  Portsmouth.  .Even  after  peace 
was  restored  the  government  was  obliged  to  meet  the  expenses 
of  the  withdrawal  of  troops,  expenses  with  regard  to  prisoners 
of  war,  expenses  for  the  replenishment  of  the  navy,  expenses 
for  supplementing  warships,  and  expenses  for  the  rewards 
granted  to  soldiers  and  others.  The  war  expenditures,  there- 
fore, were  disbursed  until  June  30,  1907,  and  the  settlement 
was  made  on  October  31,  1907.  The  war  expenditures  during 
the  Russo-Japanese  War  were  divided  into  extraordinary 
war  expenditures  and  department  extraordinary  affairs  ex- 
penditures. The  former  belonged  to  the  special  account  of 
the  budget;  the  latter  to  the  general  account.  The  plan  for 
and  the  details  of  war  expenditures  will  be  treated  in  another 
treatise  in  this  series,  and  we  intend  to  confine  our  discussion 
to  their  relation  to  the  public  debts.  When  in  October,  1903, 
the  negotiations  between  Russia  and  Japan  respecting  Korea 
and  Manchuria  came  to  a  standstill,  the  government,  realiz- 
ing the  necessity  of  armament  replenishment,  issued  Urgency 
Ordinance  No.  291,  December  29,  1903.  In  accordance  with 
this  ordinance  the  government  was  authorized  to  make  tem- 
porary loans  for  the  disbursement  of  the  necessary  expenses 
for  armament  replenishment,  to  employ  the  funds  belonging 
to  the  special  accounts,  or  to  issue  exchequer  bonds,  and  no 
limit  was  placed  on  the  maximum  amount  allowed.  On  the 
authority  of  this  ordinance  the  government  decided  to  look  to 
exchequer  bonds  amounting  to  100,000,000  yen,  the  temporary 
loans  amounting  to  30,000,000  yen,  in  round  numbers,  and  the 
funds  belonging  to  the  special  accounts  amounting  to  25,000,- 

61 


62         WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 

ooo  yen  for  their  resources ;  and  thus  to  pay  the  extraordinary 
war  expenditures  155,900,000  yen,  the  financial  department 
extraordinary  affairs  expenditures  250,000  yen  in  round 
numbers,  totaling  156,000,000  yen,  which  was  the  estimate 
of  the  expenditures  to  be  incurred  till  March  of  the  fol- 
lowing year.  On  February  6,  1904,  took  place  the  declara- 
tion of  war.  In  March,  1904,  the  twentieth  session  of  the 
Diet  was  convened,  and  the  government  obtained  a  postfacto 
consent  with  regard  to  the  urgency  outlays,  and  also  submit- 
ted the  estimates  of  the  war  expenses  from  April,  1904,  to 
December,  1904,  by  which  the  outlay  of  420,000,000  yen  (ex- 
traordinary military  expenditures  380,000,000  yen,  extraordi- 
nary affairs  expenditures  40,000,000  yen)  was  requested. 
This  request,  together  with  the  Draft  Law,  duly  passed  the 
Diet.  The  resources  for  this  outlay  consisted  of  62,000,000 
yen,  the  increased  revenue  by  the  taxes  and  monopoly,  of 
48,000,000  yen,  a  surplus  fund  due  to  the  curtailment  of  the 
general  account,  of  30,000,000  yen,  the  funds  belonging  to  the 
special  accounts  and  of  280,000,000  yen,  the  proceeds  of  ex- 
chequer bonds  and  temporary  loans.  This  was  the  first  war 
estimate.  In  November,  1904,  the  government  submitted 
the  second  war  estimate  to  the  twenty-first  session  of  the 
Imperial  Diet. 

According  to  this  second  estimate,  special  military  ex- 
penditures figured  700,000,000  yen,  and  the  extraordinary 
affairs  expenditures  80,000,000  yen,  thus  totaling  780,000,000 
yen.  The  resources  for  these  expenditures  were  sought  in 
48,330,000  yen,  a  surplus  due  to  the  curtailment  of  the  general 
annual  account,  8,000,000  yen,  the  part  of  the  fund  belonging 
to  the  special  account  which  lay  still  unutilized,  and  2,000,000 
yen  due  to  the  voluntary  contribution  for  the  war  fund  and  to 
other  miscellaneous  revenues.  It  was  clear  from  the  outset 
that  these  resources  were  inadequate  for  covering  the  enor- 
mous war  expenditures.  The  government,  therefore,  resorted 
to  the  second  increase  of  extraordinary  special  taxes,  thus  ob- 
taining 150,000,000  yen,  and  to  the  flotation  of  public  loans  to 
the  amount  of  570,000,000  yen.  With  the  progress  of  war, 


RUSSO-JAPANESE   WAR   TO   PRESENT   DAY  63 

the  shortage  of  funds  for  expenditures  was  keenly  felt,  and  the 
government  submitted  to  the  twenty-second  session  of  the 
Diet,  December,  1905,  a  supplementary  budget  of  7,200,000 
yen  as  a  supplement  to  extraordinary  affairs  expenditures  and 
looked  for  its  resources  to  the  surplus  fund  to  be  created  in  the 
general  account.  In  April,  1906,  the  government  decided 
upon  an  outlay  amounting  to  89,000,000  yen  in  excess  of  the 
estimates,  of  which  the  sum  of  60,000,000  yen  was  for  extraor- 
dinary military  expenditures  and  28,800,000  yen  for  extraor- 
dinary affairs  expenditures.  This  sum  was  to  be  disbursed 
out  of  public  loans  amounting  to  60,000,000  yen,  out  of  the 
fund  transferred  from  the  special  account  amounting  to 
4,000,000  yen,  and  out  of  the  surplus  fund  of  the  general  ac- 
count amounting  to  about  24,800,000  yen.  As  peace  was  re- 
stored in  September,  1905,  the  war  expenditures  in  the  strict 
sense  were  1,452,000,000  yen,  which  was  the  total  sum  of  the 
above-mentioned  expenditures.  But  the  government,  at  the 
latter  part  of  the  twenty-second  session  of  the  Diet,  convened 
at  the  close  of  1905,  demanded  an  outlay  of  450,450,000  yen 
as  a  supplementary  budget  on  account  of  extraordinary 
military  expenditures,  and  84,500,000  yen  for  extraordinary 
affairs  expenditures,  and  obtained  the  approval  of  both  houses. 
These  expenditures  were  needed  for  the  withdrawal  of  troops, 
the  replenishment  of  the  military  forces  and  the  rewarding  of 
soldiers.  Its  resources  were  public  loans  to  the  amount  of 
513,640,000  yen  and  the  surplus  fund  of  the  general  account 
amounting  to  16,300,000  yen. 

Further,  to  defray  the  expenses  of  the  residency-general  of 
Chosen  and  those  of  the  government  of  Kwantung,  the  gov- 
ernment submitted  in  December,  1906,  to  the  twenty- third 
session  of  the  Diet  a  supplementary  budget  with  regard  to 
extraordinary  affairs  expenditures,  their  resources  being  found 
in  the  surplus  fund  of  the  general  account,  and  obtained  the 
approval  of  both  houses. 

The  above  is  a  brief  summary  of  the  government  financial 
schemes  with  regard  to  the  Russo-Japanese  War  which  were 
carried  into  effect  through  the  Imperial  sanction  alone,  or  with 
the  consent  of  the  Diet. 


64        WAR   AND   ARMAMENT   LOANS:   HISTORICAL    SURVEY 

For  the  convenience  of  readers  we  insert  the  following  table : 
EXPENDITURES,  RUSSO-JAPANESE  WAR,  1903-1907 J 


Class 

Extraordinary 
Military 
Expenditures 

Department 
Extraordinary 
Affairs 
Expenditures 

Total 

Urgency  outlay  in  1903  

Yen 

IS5.Q7I.O15 

Yen 

257  8oi 

Yen 
156  228  929 

The  first  estimate  in  1904  .... 
The  second  estimate  in  1905  .  . 
Outlay  beyond  the  estimate  in 
1906  

380,OOO,OOO 
7OO,OOO,OOO 

6O,OOO,OOO 

4O,OOO,OOO 
87,200,000 

28.825.4.OQ 

420,000,000 
787,200,000 

88,825  4.OQ 

The  third   estimate   in    1906- 
IQO7  .  . 

450,450,000 

82,OOO,OOO 

512,450,OOO 

Total  

1,74.6,421,015 

218,281,101 

I,  Q84-,  704.^0 

REVENUE,  RUSSO-JAPANESE  WAR2 


Class 

Extraordi- 
nary Special 
Taxes 

Public  Loans, 
Exchequer 
Bonds,  and 
Temporary 
Loans 

Fund 
Trans- 
ferred from 
Special 
Accounts 

Contribu- 
tions and 
Other 
Revenues 

Surplus 
Fund  of 
General 
Account 

Total 

Urgency     meas- 
ure (1909)  .  .  . 
The  first  budget 
(1908)  

Yen 
62,201,879 

Yen 
131,228,929 
280,000,000 

Yen 
25,000,000 
30,000,000 

Yen 

Yen 
47.798,121 

Yen 
156,228,929 
420,000,000 

The      second 
budget  (1905) 
Outlay     beyond 
budget  (1906- 
1907) 

150,671,023 

571,000,000 
60,000,000 

8,000,000 
4,000,000 

2,000,000 

55,528,977 
24,825,409 

787,200,000 
88,825,409 

The       third 
budget  (1907) 

513,643,242 

18,806,758 

532,450,000 

Total  

212,872,902 

1,555,872,171 

67,000,000 

2,000,000 

146,959.265 

1,984,704,330 

The  financial  scheme  for  the  war  expenses  figures  up  to 
1,984,700,000  yen,  both  in  revenue  and  in  expenditures.  But 
the  actually  settled  account  showed  a  figure  much  smaller 
than  this  amount. 

1  In  addition,  there  was  also  1,422,584  yen,  disbursed  out  of  reserve  fund  and 
surplus  fund  as  department  extraordinary  affairs  expenditures  in  the  fiscal  year 
1904. 

2  The  surplus  of  years  account  was  the  fund,  obtained  or  expected  to  be  obtained 
by  the  curtailment  of  military  and  naval  general  expenditures,  suspension  of  public 
loans  redemption,  curtailment  of  extension  of  steamship  routes  expenditures,  and 
of  encouragement  of  navigation,  curtailment  and  postponement  of  continuing  ex- 
penditures. 


RUSSO-JAPANESE   WAR  TO   PRESENT   DAY  65 

Looking  first  at  the  final  account  from  the  standpoint  of 
expenditure,  it  consisted  of  extraordinary  military  expendi- 
tures and  the  department  extraordinary  affairs  expenditures, 
and  was  as  follows: 

Extraordinary  military  expenditures:  Yen  Yen 

In  charge  of  Army  Department 1,283,318,056 

"       "      "    Navy  "         225,154,482 

1,508,472,538 

Department  extraordinary  affairs  expenditures: 

Fiscal  year  1903 1,560,209 

1904 31,548,913 

1908 109,638,306 

1909 65,223,485 

1910 13,610,695 

—        221,581,608 


Total 1,730,054,146 

To  provide  resources  for  these  expenditures,  the  govern- 
ment, in  accordance  with  the  aforesaid  scheme,  made  a  great 
curtailment  in  the  general  account,  thereby  creating  a  surplus. 
Besides,  it  diverted  the  three  great  special  funds  and  other 
funds  of  the  special  account;  established  and  increased  ex- 
traordinary special  taxes  in  1904  and  1905,  and  floated  public 
loans  and  temporary  loans  both  at  home  and  abroad,  before 
and  after  the  declaration  of  war.  These,  together  with  volun- 
tary contributions  for  the  military  fund  and  miscellaneous 
revenues,  were  appropriated  to  the  disbursement  of  the  war 
expenses.  As  to  the  extraordinary  military  expenditures  for 
the  army  and  navy,  a  special  account  was  created  and  a  clear 
settled  account  was  obtained  of  the  kinds  and  amount  of  the 
resources  employed  for  extraordinary  military  expenditures. 

As  to  the  department  extraordinary  affairs  expenditures,  no 
special  account  was  established,  and  settlement  was  made  at 
each  fiscal  year  in  the  general  account,  and  their  resources 
were  utilized  in  common  with  the  general  income.  The  kinds 
and  amount  of  the  resources,  therefore,  are  not  clear. 

The  final  settlement  of  the  war  fund  revenue  as  a  resource 
for  the  extraordinary  military  expenditures,  which  amounted 
to  1,508,472,538  yen,  was  as  follows: 


66        WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 

WAR  FUND  FOR  RUSSO-JAPANESE  WAR 

Yen  Yen 

Transferred  from  general  account: 

Receipt  of  extraordinary  special  tax 119,000,000 

Surplus  due  to  curtailment  of  expenditures.  . .  .       63,430,129 

182,430,129 

Transferred  from  special  accounts: 

Warship  and  torpedo  boat  replenishment  fund  38,311,977 

Calamity  reserve 10,000,000 

Education  reserve 10,000,000 

Forestry  fund 3,000,000 

Diversion  of  other  special  account  funds 8,000,000 

69,311,977 
Public  loans: 

Net  proceeds  of  exchequer  bonds,  fifth  issue  .  .  434,885,638 
Net  proceeds  of  sterling  loans,  fourth  issue.  .  .  .  689,594,571 
Net  proceeds  of  extraordinary  military  loans .  .  .  294,25 1 ,02 1 

1,418,731,230 

Contribution  and  miscellaneous  receipt: 

Contribution  to  war  fund 2,331,176 

Sale  of  government  property 18,875,114 

Transportation  receipt 9,908,783 

Special  receipt 3,516,324 

Miscellaneous  receipt 16,107,521 

50,738,918 


Total 1,721,212,254 

Comparing  this  total  of  war  funds  with  the  amount  of  the 
extraordinary  military  expenditures,  the  former  exceeded  the 
latter  by  212,739,718  yen.  This  surplus  did  not  serve  as  a 
resource  for  department  extraordinary  affairs  expenditures, 
but  the  greater  part  of  it  was  transferred  to  the  general  ac- 
count, while  a  small  remainder  became  the  revenue  of  the 
general  account  after  the  war  as  a  pure  surplus.  The  figures 
are  as  follows: 

Appropriated   to  extraordinary   military  expenditures  of  general  Yen 

account 137,243,731 

Transferred  to  the  general  revenue  of  the  general  account 75,495,987 

Surplus  of  the  receipt  of  war  fund 212,739,718 

The  resources  for  221,581,608  yen,  the  total  amount  of  de- 
partment extraordinary  affairs  expenditures,  were  the  general 
revenue  of  the  general  account,  especially  the  surplus  fund  due 
to  the  curtailment  of  the  annual  account,  the  remainder  of  the 
extraordinary  special  taxes,  and  the  natural  increases  of  rev- 
enue. The  department  extraordinary  affairs  expenditures, 
therefore,  had  no  immediate  relation  with  war  loans. 

In  short,  the  war  loans  with  regard  to  the  Russo-Japanese 


RUSSO-JAPANESE  WAR  TO    PRESENT   DAY  67 

War  consisted  of  five  exchequer  bonds,  four  sterling  loans  and 
three  extraordinary  military  loans.  To  this  must  be  added 
the  temporary  loan  for  the  redemption  of  military  bills,  which 
amounted  to  15,250,000  yen. 

We  shall  next  say  a  few  words  about  the  expansion  of  arma- 
ment newly  planned  after  the  conclusion  of  the  war.  At  the 
time  of  the  opening  of  hostilities  with  Russia  the  military 
authorities  changed  the  formal  plan  of  mobilization  and  or- 
ganized four  new  standing  divisions  in  1906.  When  the 
budget  for  the  year  was  submitted  to  the  Diet,  they  demanded 
of  the  Diet  an  outlay  required  for  the  two  more  standing  divi- 
sions, and  obtained  its  consent.  Thus  the  army  of  the  Empire 
increased  by  six  divisions  and  the  standing  army  numbered 
nineteen  divisions.  The  naval  authorities  also  planned  the 
construction  of  new  warships,  and  after  the  war  demanded 
an  outlay  required  for  the  scheme.  The  tonnage  of  warships 
and  torpedo  boats  was  only  260,000  tons  before  the  war,  but 
in  1908  it  reached  513,000  tons. 

From  the  fiscal  year  1907  military  authorities  expanded 
armament  in  the  name  of  expenditure  for  repair  and  furnish- 
ing and  postbellum  expenditure,  besides  the  expenditure  for 
remaining  business  concerning  the  extraordinary  military  ex- 
penditure ;  naval  authorities  also  planned  a  great  expansion  in 
the  name  of  supplementing  expenditure  for  warships  and  tor- 
pedo boats  and  expenditure  for  repairing  and  replenishing, 
besides  the  expenditure  for  manufacturing  warships,  which 
was  already  decided.  In  the  fiscal  year  1911,  before  this 
third  expansion  was  yet  concluded,  the  naval  authorities  again 
made  an  addition  of  82,000,000  yen  in  round  numbers  as  the 
fourth  expansion  scheme  to  the  350,000,000  yen,  which  had 
been  the  total  sum  of  the  naval  expenditures,  thus  raising  it 
to  440,309,016  yen.  They  decided  to  make  an  outlay  01,248,- 
000,000  yen  in  round  numbers  between  1911  and  1916.  The 
most  of  the  sum  has  already  been  expended,  and  the  sum  still 
remaining  in  1914  is  only  108,370,870  yen.  The  total  sum  for 
the  army  expansion  was  168,237,087  yen,  the  sum  remaining  to 
be  expended  after  1914,  viz.,  45,811,765  yen.  Thus,  the  ex- 


68         WAR   AND   ARMAMENT    LOANS  I   HISTORICAL   SURVEY 

pansion  of  armament  in  army  and  navy  involved  an  expendi- 
ture amounting  to  608,000,000  yen  in  round  numbers,  of  which 
about  454,000,000  yen  has  already  been  expended,  and  the 
sum  remaining  to  be  expended  in  and  after  the  fiscal  year  of 
1914  is  145,000,000  yen  in  round  numbers.  The  resources  for 
this  were  not  sought  in  the  flotation  of  public  loans,  but  in  the 
general  revenue  of  the  general  account.  Inasmuch  as  the 
general  account  could  not  supply  such  a  big  sum  of  money,  the 
surplus  money  transferred  from  the  extraordinary  military 
expenditures  special  account,  the  increased  revenue  due  to  the 
increase  of  taxes  in  1908,  the  curtailment  of  the  general  ac- 
count, and  the  natural  increase  of  the  old  resources  had  to  be 
resorted  to.  In  short,  the  postbellum  expansion  of  armament 
was  planned  in  the  fiscal  years  of  1907  and  1911  and  is  still  be- 
ing carried  on,  but  no  public  loans  were  floated  for  that  pur- 
pose. From  the  Russo-Japanese  War  to  the  present,  there- 
fore, no  public  loans  with  regard  to  war  have  been  raised. 

The  war  loans  to  be  considered  in  the  following  sections  are 
the  exchequer  bonds,  sterling  loans,  the  extraordinary  affairs 
loan,  loans  for  the  redemption  of  military  bills  and  several 
temporary  loans. 

EXCHEQUER  BONDS 

Exchequer  bonds  were  domestic  loans  with  coupons,  issued 
during  the  Russo-Japanese  War,  to  raise  a  big  sum  for  war 
funds.  The  term  was  fixed  at  five  or  seven  years.  At  first 
they  were  floated  in  accordance  with  an  Imperial  Urgency 
Ordinance,  December,  1903.  But  later,  they  came  to  be 
regulated  by  Law  No.  I,  March,  1904,  and  Law  No.  12, 
January,  1905.  The  sum  floated  amounted  to  480,000,000 
yen. 

The  first  issue  amounted  to  100,000,000  yen.  The  details  of 
this  issue  were  provided  for  by  Finance  Department  Order  No. 
4,  February,  1904,  which  was  put  into  effect  in  July  of  the  same 
year.  The  bonds  took  the  form  of  unregistered  bonds  with 
coupons  and  included  issues  of  minor  units  such  as  25  yen  and 


RUSSO-JAPANESE   WAR   TO    PRESENT   DAY  69 

50  yen.  The  interest  was  fixed  at  5  per  cent  per  annum,  and 
the  redemption  was  to  be  made  within  five  years.  The  issue 
price  was  95,  and  the  payment  was  to  be  made  in  five  instal- 
ments. 

The  second  issue  amounted  to  100,000,000  yen.  Its  details 
were  stipulated  for  by  Finance  Department  Order  No.  17, 
May,  1904.  The  issue  amount,  the  rate  of  interest,  the  kinds 
of  bonds,  etc.,  were  similar  to  the  provisions  of  the  preceding 
issue.  The  term  of  redemption  was  fixed  at  seven  years.  The 
issue  price  was  92,  and  the  payment  was  to  be  made  in  nine 
instalments. 

The  third  issue  amounted  to  80,000,000  yen.  The  details 
were  laid  down  by  Finance  Department  Order  No.  41,  October, 
1904.  The  terms  of  redemption,  rate  of  interest,  price  of  issue, 
etc.,  were  similar  to  those  of  the  second  issue.  The  number  of 
instalments,  however,  was  changed  into  eight,  and  its  proce- 
dure was  much  simplified. 

The  fourth  issue  was  100,000,000  yen.  Its  details  were 
prescribed  by  Finance  Department  Order  No.  8,  March,  1905. 
The  rate  of  interest  was  fixed  at  6  per  cent,  the  issue  price  at 
90,  the  terms  of  redemption  at  seven  years  and  the  number  of 
instalments  was  reduced  to  six.  Other  details  were  similar  to 
those  of  the  first  issue. 

The  fifth  issue  also  amounted  to  100,000,000  yen.  Its  de- 
tails were  laid  down  by  Finance  Department  Order  No.  26, 
April,  1905.  The  rate  of  interest,  the  terms  of  redemption, 
issue  price,  and  other  details  followed  the  example  of  the 
fourth  issue.  But  allotments  less  than  25  yen  for  which  hith- 
erto the  minimum  bond  of  25  yen  was  delivered  were  excluded 
from  the  amount  invited  and  were  apportioned  among  the 
allotments  more  than  25  yen. 

The  success  or  failure  of  subscriptions  for  the  exchequer 
bonds  was  significant  of  the  financial  capacity  of  Japan,  which 
was  watched  with  eagerness  both  at  home  and  abroad.  The 
government,  therefore,  paid  the  closest  attention  to  each  issue 
and  the  convenience  of  the  subscriber  was  fully  taken  into  con- 


7O         WAR   AND   ARMAMENT   LOANS:   HISTORICAL    SURVEY 


sideration.  Especially  noteworthy  is  the  fact  that,  in  ac- 
cordance with  the  Communication  Department  Order  No.  67, l 
the  management  of  applications,  payments,  etc.,  came  into 
the  hands  of  the  post-offices.  Each  issue  was  attended  with 
great  success.  The  maximum  of  the  total  amount  responded 
to  was  approximately  five  times  as  much  as  the  amount 
issued.  Even  the  minimum  response  was  not  less  than  three 
times  as  much.  The  highest  application  above  par  was  as 
much  as  77  per  cent  of  the  amount  of  issue  price.  Especially 
in  the  fourth  issue,  applications  came  in  abundance  from 
foreigners,  which  rose  to  82,620,000  yen  in  round  numbers. 
In  their  issue  prices,  as  well  as  in  the  percentage  of  response, 
the  present  issues  were  widely  different  from  those  in  the 
Sino-Japanese  War,  which  indicated  the  .remarkable  economi- 
cal progress  of  our  nation.  The  following  table  shows  (in 
yen)  the  amount  offered,  issue  prices,  and  the  amount  re- 
sponded to,  the  amount  of  issue,  and  the  net  proceeds : 

EXCHEQUER  BONDS 2 


Bonds 

Amount 
Invited 

Issue 
Price 

Amount 
Responded 

Amount  of 
Issue 

Net 
Proceeds 

First  issue  (5%) 
Second  issue  (5%) 
Third  issue  (5%). 
Fourth  issue  (6%) 
Fifth  issue  (6%)  .  . 

Yen 
100,000,000 
100,000,000 
80,000,000 
100,000,000 
100,000,000 

Yen 
95 
92 
92 
90 
90 

Yen 
452,130,457 
322,190,950 
245,829,200 
485.876,250 
498,261,220 

Yen 
96,977,400 
98,876,650 
77,480,725 
99,790,575 
99,936,150 

Yen 
92,376,124 
90,981,796 
71,288,675 
90,254,962 
89,989,081 

Total  

480  000,000 

2,004,288,177 

4.7^.061,500 

4"U,  88s,  6-*8 

EXTRAORDINARY  MILITARY  EXPENDITURES  LOAN 

When  the  peace  between  Russia  and  Japan  had  been  re- 
stored, a  great  sum  of  money  was  required  to  cover  the  deficits 
of  the  war  expenditures,  the  withdrawal  of  troops,  and  the 
grant  of  rewards.  The  government,  in  order  to  meet  these  ex- 
penses, submitted  to  the  twenty-second  session  of  the  Imperial 

1  Regulation  with  regard  to  the  management  of  exchequer  bonds  issue  by  the 
post-offices. 

2  This  table  is  based  on  the  "Report  of  War  Finance"  and  "National  Loans 
Statistics." 


RUSSO-JAPANESE   WAR   TO   PRESENT   DAY  7 1 

Diet  a  bill  relating  to  the  disbursement  of  the  extraordinary 
military  expenditures,  and,  with  the  approval  of  the  same, 
promulgated  Law  No.  I,  March,  1906.  In  accordance  with 
this  law  the  government  had  the  authority  either  to  float 
temporary  loans  or  funded  loans,  or  to  employ  the  funds  be- 
longing to  the  special  account,  to  the  extent  of  363,000,000 
yen,  in  order  to  meet  the  extraordinary  military  expenditures 
(Art.  I).  To  meet  the  requirement  for  replenishing  the  army 
and  navy,  as  well  as  other  public  works,  and  to  meet  an  ex- 
traordinary outlay  for  military  purposes  for  Korea  and  Man- 
churia, the  government  was  authorized  to  employ  the  funds 
belonging  to  the  special  accounts  and  to  float  public  loans  to 
the  amount  of  70,000,000  yen  (Art.  II). 

The  extraordinary  military  expenditures  loan  was  floated  in 
accordance  with  this  law.  This  loan  consisted  of  5  per  cent 
funded  bonds  to  be  paid  off  in  thirty  years,  after  remaining 
unredeemed  for  five  years.  This  was  therefore  called  a  special 
5  per  cent  public  loan.  There  were  two  categories  to  this 
loan.  The  extraordinary  military  expenditures  loan  of  the 
first  category  was  floated  by  the  terms  laid  down  in  Finance 
Department  Order  No.  8,  March,  1906.  Its  main  object  con- 
sisted in  the  replenishment  of  the  army  and  navy  and  the  with- 
drawal and  supplement  of  troops.  Its  minimum  issue  price 
was  95.  The  payment  was  to  be  made  in  five  instalments, 
and  a  discount  of  80  sen  per  100  yen  (face  value)  was  granted 
to  those  who  made  their  payment  in  two  instalments  instead  of 
five.  Moreover,  in  payment,  the  exchequer  bonds  of  the 
fourth  and  fifth  issues  were  allowed  to  be  substituted  for  cash, 
and  the  substitute  price  was  to  be  determined  by  the  face 
value  plus  accrued  interest.  In  case  the  amount  subscribed 
exceeded  the  sum  required,  it  was  to  be  accepted  in  the  order 
of  the  highest  bids,  till  the  necessary  amount  was  met.  In 
case  prices  tendered  were  the  same,  allotment  was  to  be  made 
in  ratio  of  the  amount  subscribed. 

The  amount  responded  to  before  the  subscription  was 
closed  was  372,829,100  yen  which  exceeded  the  amount  in- 
vited (200,000,000  yen)  by  172,829,100  yen,  or  a  little  over  86.4 


72         WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 

per  cent  more  than  the  invited  sum.     These  figures  are  shown 
in  the  following  table : 

Yen 

Amount  invited 200,000,000 

Amount  responded  to  in  cash 333,467,100 

"  in  subscription 333,467,100 

Total  amount  responded  to , 372,829,100 

Application  above  par 12,315,200 

at  par 360,513,900 

Amount  of  excess 172,829,100 

Net  proceeds 189,064,218 

Of  the  allotment,  amounting  to  200,000,000  yen,  328,900 
yen  could  not  be  obtained.  New  bonds,  amounting  to  500 
yen,  were  issued  as  substitutes  for  lost  bonds.  With  the  de- 
duction of  the  former,  and  the  addition  of  the  latter,  the 
amount  of  issue  was  finally  fixed  at  199,671,600  yen. 

The  second  kind  of  extraordinary  military  expenditures  loan 
was  issued  in  accordance  with  the  conditions  provided  for  in 
Finance  Department  Order,  June,  1906,  to  provide  a  fund  for 
grants  to  soldiers.  It  was  delivered  by  special  issue,  and  the 
amount  of  issue  was  110,722,950  yen.  The  issue  price  having 
been  only  95,  the  actual  sum  of  the  grant  was  calculated  at 
1 05, 1 86, 806  yen. 

Thus  the  grand  total  of  the  extraordinary  military  expendi- 
tures loan,  including  both  the  first  and  second  issues,  figures 
up  to  310,394,550  yen.  This  was  the  sum  outstanding  on 
March  31,  1907.  As  there  was  an  increase  of  2,450  yen  in  the 
issue  amount,  the  floated  sum  after  1908  was  revised  to  310,- 
407,000  yen. 

Six  PER  CENT  STERLING  LOAN 

Upon  the  outbreak  of  war  between  Russia  and  Japan  it  was 
clear  that  the  stupendous  outlays  necessary  to  carry  on  the 
war  could  not  be  raised  in  the  home  market  alone,  as  was  done 
in  the  Sino-Japanese  War.  The  government  planned  from 
the  outset  to  depend  upon  foreign  loans  for  a  part  of  its  re- 
sources. In  February,  1904,  negotiations  were  started  to  float 
a  sterling  loan  not  exceeding  £20,000,000  on  the  London 
market.  The  terms  proposed  by  foreign  capitalists,  however, 
were  far  from  being  satisfactory  to  our  government.  The 


RUSSO-JAPANESE   WAR   TO    PRESENT   DAY  73 

requirement  for  foreign  loans  steadily  increased  after  the  dec- 
laration of  war,  while  the  specie  reserve  of  the  Bank  of  Japan 
sank  terribly.  It  stood  then  at  about  83,000,000  yen,  and 
there  were  gloomy  apprehensions  of  a  further  outflow  of  a  huge 
amount.  On  the  other  hand,  the  issue  amount  of  convertible 
notes  was  approximately  286,000,000  yen,  thus  exceeding  the 
legal  limit  by  83,000,000  yen.1  Moreover,  metallic  currency 
was  badly  needed  for  the  repayment  of  the  principal  and  pay- 
ment of  the  interest  of  the  old  foreign  loans.  Under  the  pres- 
sure of  these  circumstances  the  government  finally  accepted 
the  terms  of  the  capitalists,  but  with  some  favorable  modifica- 
tions; and  it  decided  to  float  £10,000,000  on  May  7,  1904.  A 
provisional  contract  concerning  the  flotation  of  public  loans 
was  entered  into  with  Parr's  Bank,  the  Hongkong  and  Shang- 
hai Banking  Corporation,  and  the  Specie  Bank,  and  in  May, 
1904,  a  regulation  with  regard  to  the  first  6  per  cent  sterling 
loan  was  promulgated  by  Imperial  Ordinance  No.  138.  The 
regulation  provided,  (i)  that  the  total  value  of  the  issue  should 
be  £10,000,000,  with  the  rate  of  interest  at  6  per  cent  per  an- 
num, (2)  that  the  loan  could  be  redeemed  at  six  months'  notice 
after  the  lapse  of  three  years,  though  the  term  of  redemption 
was  fixed  at  seven  years,  (3)  that  the  issue  price  should  be  £93, 
los.  per  £100  and  the  net  proceeds  to  the  government  £90  per 
£100,  (4)  that  government  receipts  of  customs  duties  should  be 
made  security  for  the  repayment  of  the  capital  and  payment 
of  interest,  (5)  that  coupons  overdue  and  clipped  might  be 
appropriated  to  the  payment  of  customs  duties,  at  the  rate  of 
I  yen  per  2s.  o^d.,  and  that  the  subscriptions  should  be  paid  in 
full  between  May  and  August,  1904,  in  four  instalments.  As 
to  the  interest,  the  portion  for  the  first  half  year  was  to  be  paid 
on  October  of  the  current  year,  and  that  for  the  second  half 
year  on  April  5  of  the  following  year.  Thenceforth,  the  inter- 
est for  each  half  year  was  to  be  paid  on  October  5  and  April  5. 
The  program  of  issue  was  published  from  the  issuing  banks 
on  May  10  in  New  York  (nth  in  London)  and  the  filing  of 
subscriptions  commenced  on  the  I2th  of  the  same  month. 

1  Statistics  at  the  end  of  1904. 


74        WAR  AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 

Just  then  the  Yalu  battle  was  fought,  which  resulted  in  our 
favor.  It  carried  confidence  in  Japan  to  the  highest  pitch. 
The  application  for  subscriptions,  therefore,  was  attended  with 
great  success,  so  that  the  application  was  closed  on  the  same 
day  in  London,  and  on  the  following  day  in  New  York.  In 
London  the  amount  subscribed  reached  over  thirty-three 
times  the  sum  required,  the  number  of  applications  being 
about  30,022,  representing  a  sum  of  about  £151,975,500.  In 
New  York  it  attained  nearly  five  times  the  amount  invited, 
and  the  sum  paid  up  by  the  subscribers  was  all  transmitted  to 
London.  Thus  our  government  received  between  May  and 
August  of  the  same  year  from  the  issuing  banks  £9,000,000 
(86,834,170.854  yen)  in  four  instalments,  after  the  deduction 
of  the  commissions. 

The  greater  part  of  the  fund  raised  by  the  first  sterling  loan 
was  delivered  to  the  Bank  of  Japan  for  the  redemption  of 
temporary  loans,  and  the  same  bank  was  directed  to  keep  it  as 
specie  reserve.  The  specie  reserve,  which  had  once  decreased 
to  80,000,000  yen  in  round  numbers,  again  increased  to  115,- 
000,000  yen.  The  war  assumed  ever-increasing  dimensions, 
and  the  foreign  payments  of  the  government  had  the  prospect 
of  attaining  a  stupendous  amount.  The  finance  minister, 
therefore,  decided  to  contract  another  debt  amounting  to 
from  100,000,000  yen  to  .200,000,000  yen  during  1904.  Nego- 
tiations with  regard  to  the  flotation  of  a  foreign  loan  were 
commenced  in  October  of  the  same  year.  The  public  credit  at 
that  time  could  not  have  been  better,  as  the  progress  of  the 
war  was  on  our  side,  and  as  the  money  markets  abroad  were 
then  sluggish.  Accordingly,  the  negotiations  in  London 
progressed  smoothly.  Incidentally,  however,  the  North  Sea 
affair  sprang  up  between  Great  Britain  and  Russia,  which 
accounted  for  the  tendency  to  decline  of  our  first  6  per  cent 
public  loan.  The  government  was  obliged  to  comply  with  a 
request  of  the  capitalists,  and  make  some  modifications  in  the 
issue  price  and  commissions.  The  government,  after  conced- 
ing these  variations,  finally  appointed  a  financial  commis- 
sioner to  conclude  a  provisional  agreement  with  the  represent- 


RUSSO-JAPANESE   WAR   TO    PRESENT   DAY  75 

atives  of  the  aforesaid  issuing  banks  oh  November  8,  with 
regard  to  the  subscription  of  £12,000,000.  The  terms  of  the 
subscription  were  (i)  that  the  amount  of  issue  should  be  fixed 
at  £12,000,000,  (2)  that  the  rate  of  interest  should  be  6  per 
cent  per  annum,  (3)  that  the  term  of  redemption  should  be 
seven  years,  (4)  that  the  issue  price  should  be  £90,  los.  per  face 
value  £100,  (5)  that  the  net  proceeds  of  the  government  should 
be  £86,  155.  after  deducting  £3,  155.  as  commissions,  (6)  that 
the  customs  duties  were  to  be  made  security  to  guarantee  the 
present  loan  after  the  redemption  of  the  first  6  per  cent  sterling 
loan. 

The  legal  limit 1  to  public  loans  issues  had  already  been  filled 
to  its  utmost  capacity  through  these  several  issues.  Upon  the 
conclusion  of  the  present  agreement,  therefore,  the  govern- 
ment had  recourse  to  the  promulgation  of  an  Imperial  Urgency 
Ordinance  No.  288,  November  10,  enabling  itself  to  issue  a 
government  loan  amounting  to  120,000,000  yen  for  meeting 
the  extraordinary  military  expenditures.  Simultaneously 
with  this  ordinance,  Ordinance  No.  229  was  promulgated, 
which  laid  down  the  terms  and  the  procedure  of  the  subscrip- 
tion, which  was  substantially  the  same  as  the  provisions  of  the 
first  loan. 

This  loan  was  raised  in  London  and  New  York.  In  Lon- 
don, the  receipt  of  subscription  tenders  was  opened  on  Novem- 
ber 14,  1904,  and  closed  at  noon  of  the  following  day,  when  the 
number  of  applications  rose  to  29,938,  representing  a  sum  of 
£80,533,800,  or  more  than  thirteen  times  the  sum  required. 
In  New  York,  too,  the  receipt  of  tenders  was  commenced  on 
November  14,  but  was  not  closed  until  the  i8th  of  the  same 
month,  for  the  convenience  of  the  local  applicants  and  for  the 
encouragement  of  small  tenders.  The  amount  subscribed 
figured  up  to  six  or  seven  times  the  sum  invited.  The  money 
raised  in  London,  amounting  to  £5,205,000  (50,219,095.471 
yen)  was  received  in  four  instalments  between  December, 
1904,  and  March,  1905.  The  money  raised  in  New  York, 
amounting  to  $25,348,350  (50,244,499.505  yen)  was  received  in 

1 280,000,000  yen  provided  by  Law  No.  I,  Art.  2,  1904. 


76        WAR  AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 

three  instalments  between  December,  1904,  and  January, 
1905.  In  short,  the  total  sum  actually  received  was  100,463,- 
594.982  yen. 

The  6  per  cent  public  loans  raised  during  1904  totaled 
214,786,000  yen  according  to  the  amount  of  issue,  or  187,297,- 
765  yen  according  to  the  net  proceeds.  The  above  two  6 
per  cent  public  loans  amounting  to  £22,000,000  were  raised  on 
the  most  unfavorable  terms,  wholly  on  account  of  the  urgent 
necessities  of  the  war.  When  the  optional  redemption  period 
(April  5,  1907)  approached,  after  the  restoration  of  peace,  a 
5  per  cent  sterling  loan  was  floated  in  March,  1907,  and  the 
full  repayment  was  thus  completed  in  September,  1907. 

FOUR  AND  A  HALF  PER  CENT  STERLING  LOAN 

Out  of  the  public  loan  amounting  to  571,000,000  yen,  which 
was  to  be  floated  to  meet  the  extraordinary  military  expendi- 
tures of  1905,  120,000,000  yen  was  to  be  received  in  March  of 
the  same  year  through  the  flotation  of  the  second  6  per  cent 
sterling  loan.  The  disbursement  of  expenditures,  and  the 
necessities  of  general  economy,  compelled  the  government  to 
raise  the  remaining  sum  in  1905.  With  this  object  in  view  the 
government  dispatched  financial  committees  to  London  in 
February,  1905.  Just  then  the  war  had  attained  a  remarkable 
development,  and  Europeans  and  Americans  were  amazed  and 
dumbfounded  at  the  surrender  of  Port  Arthur,  and  the  signal 
victory  at  Mukden.  Their  sympathies  were  enlisted  toward 
Japan,  and  the  capitalists  competed  with  one  another  in 
subscribing  to  our  loans.  The  government  was,  therefore,  in 
a  position  to  conclude  an  agreement  with  the  three  issuing 
banks  (Parr's,  Hongkong  and  Shanghai,  and  Yokohama 
Specie),  in  March,  1905, upon  more  favorable  terms  than  in  the 
preceding  loans,  and  with  an  increase  of  the  amount  invited. 
The  more  important  terms  of  the  agreement  were,  (i)  that  the 
amount  of  issue  should  be  fixed  at  £30,000,000,  (2)  that  the 
rate  of  interest  should  be  4.5  per  cent  per  annum,  (3)  that  the 
term  of  redemption  should  be  twenty  years,  with  the  proviso 
that  after  remaining  unredeemed  for  five  years  bonds  could  be 


RUSSO-JAPANESE   WAR   TO    PRESENT   DAY  77 

redeemed  at  six  months'  notice,  (4)  that  the  issue  price  should 
be  90,  (5)  that  the  commission  should  be  £3,  55.,  i.e.,  the  net 
receipt  of  the  government  was  £86,  55.  per  £100,  (6)  that  the 
security  should  be  the  net  receipt  out  of  the  tobacco  monopoly, 
(7)  that  the  monthly  payment  of  interest  should  be  superseded 
by  one  single  payment  before  the  date  due,  (8)  that,  as  in  the 
preceding  cases,  the  amount  of  issue  should  be  divided  be- 
tween London  and  New  York. 

This  third  sterling  loan  was  the  so-called  first  4.5  per  cent 
sterling  loan.  Upon  the  conclusion  of  the  agreement  with  re- 
gard to  this  loan,  the  government,  in  conformity  with  Law  No. 
12,  January,  1905,  laid  down  in  Imperial  Ordinance  No.  73, 
March  27,  1907,  the  rules  concerning  the  terms  and  the  pro- 
cedure of  the  issue.  This  loan  was  so  popular  in  London  that 
it  commanded  a  premium  of  from  I  to  2.5  per  cent  prior  to  its 
issue.  Thus  upon  opening  the  subscription  at  9  a.m.  on 
March  29,  the  space  outside  every  issuing  bank  was  crammed 
with  people, — so  much  so  that  policemen  had  to  be  on  the 
watch  to  maintain  order.  This  was  specially  the  case  with  the 
Hongkong  and  Shanghai  Banking  Corporation,  in  front  of 
which  scenes  of  great  disorder  were  witnessed.  The  subscrip- 
tion was  therefore  closed  at  3.30  p.m.  of  the  same  day.  The 
amount  subscribed  figured  about  eleven  times  the  sum  re- 
quired, £15,000,000.  The  total  sum  subscribed  was  £162,- 
949,000,  of  which  £151,000,000  was  responded  to  by  England 
(applicants  numbering  50,000)  and  the  remainder — £11,949,- 
ooo — was  responded  to  by  Germany,  Belgium,  Switzerland, 
the  Netherlands,  Austria  and  other  different  continental  coun- 
tries. In  New  York  the  receipt  of  subscription  tenders  was 
opened  on  the  same  day  as  in  London  and  was  closed  at  3  p.m. 
on  the  following  day  (the  3Oth) .  The  amount  applied  for  rose 
to  about  $500,000,000,  or  nearly  seven  times  as  much  as  the 
sum  required. 

Out  of  the  50,000  applicants  in  England,  over  43,000  persons 
were  offerers  of  below  £2,000,  and  in  New  York,  too,  there 
were  numerous  small  applications.  One  special  feature  of 
this  subscription  was  the  great  response  from  the  countries  of 


78         WAR   AND   ARMAMENT   LOANS:   HISTORICAL    SURVEY 

continental  Europe.  France  made  every  effort  to  secure  a 
private  agreement  for  underwriting  it,  and  upon  the  com- 
mencement of  the  subscription  French  capitalists  offered  large 
subscriptions  both  in  London  and  in  New  York.  This  virtual 
monopoly  of  the  money  markets  in  Europe  and  America  was 
undoubtedly  the  result  of  the  consecutive  victories  of  our  army 
and  navy  and  the  rise  of  our  financial  credit.  Out  of  this  loan, 
£13,012,500  (125,547,738.694  yen)  was  received  in  London  in 
five  instalments  between  August  and  April  of  the  same  year. 
In  New  York  $63,370,875  (125,611,248.762  yen)  was  likewise 
received  in  three  instalments  between  April  and  June  of  the 
same  year.  The  subscription  figured  up  to  300,000,000  yen, 
and  the  amount  actually  received  by  the  government  was 
251,158,987  yen,  the  issue  amount  being  292,890,000  yen. 

During  the  subscription  of  the  first  4.5  per  cent  sterling 
loans,  the  decisive  battle  of  the  Japan  Sea  was  fought.  As 
soon  as  the  report  of  this  unparalleled  victory  was  dispatched 
to  Europe  and  America,  the  sympathy  for  our  country  rose 
even  to  madness.  The  market  prices  of  our  bonds  advanced 
by  leaps  and  bounds,  promising  a  unique  opportunity  for  the 
the  flotation  of  a  public  loan.  Our  government  had  already 
issued  exchequer  bonds  in  the  home  market  to  the  aggregate 
amount  of  200,000,000  yen,  which  together  with  the  third  ster- 
ling loan  exceeded  the  amount  of  flotation  previously  fixed  for 
1905.  The  war  continued,  however,  pushing  the  restoration 
of  peace  to  a  distant  future  and  involving  increasing  war  ex- 
penditures. The  subscription  of  foreign  loans  had  to  be  relied 
upon  in  the  future,  and  the  victory  offered  the  best  opportu- 
nity for  this  expedient.  Hereupon  our  financial  agents  again 
opened  negotiations  with  regard  to  the  flotation  of  another 
loan,  and  an  agreement  on  the  same  terms  as  the  previous  ones 
was  concluded  with  the  issuing  banks.  The  only  difference 
was,  that  while  the  issues  were  hitherto  limited  to  the  markets 
in  England  and  America,  Germany  now  came  into  the  list,  and 
the  subscription  was  equally  divided  among  these  three  mar- 
kets. Upon  the  conclusion  of  the  agreement,  the  government 
promulgated  an  Imperial  Ordinance  No.  194,  July  8,  1905,  au- 


RUSSO-JAPANESE   WAR  TO   PRESENT   DAY  79 

thorizing  a  loan  amounting  to  300,000,000  yen  to  cover  the 
extraordinary  military  expenditures.  On  the  same  day  Im- 
perial Ordinance  No.  195  was  promulgated  providing  for  the 
details  of  the  subscription.  The  ordinance  provided  (i)  that 
the  amount  of  subscription  should  be  £30,000,000  sterling 
with  the  underwriter  specified,  (2)  that  the  rate  of  interest 
should  be  4.5  per  cent  per  annum,  (3)  that  the  principal 
should  be  repaid  not  later  than  July  10,  1924,  according  to  the 
face  value,  and  not  before  July  10,  1910.  The  government 
could,  if  it  thought  fit,  redeem  a  portion  or  the  whole  of  it  at 
six  months'  notice  in  the  newspapers.  The  redemption  of  the 
principal  and  interest  of  this  loan  was  secured  on  the  profit  of 
the  tobacco  monopoly,  subject,  however,  to  preferential  secu- 
rity of  the  first  4.5  per  cent  sterling  loan,  (4)  that  the  issue 
price  be  90,  (5)  that  the  principal  be  paid  during  the  period  ex- 
tending from  July,  1905,  to  December,  1905,  (6)  that  the  half- 
yearly  interest  for  the  amount  subscribed  should  be  paid  on 
January  10,  1906. 

The  sale  began  on  July  u  in  London  and  Germany,  and  in 
New  York  on  the  I2th,  and  in  each  case  was  closed  on  the 
same  day.  The  result  was  splendid,  inasmuch  as  the  amount 
subscribed  was  a  little  less  than  ten  times  the  sum  required  in 
London,  four  times  and  a  half  in  New  York,  and  a  little  lower 
than  ten  times  in  Germany.  Not  only  in  politics,  but  in 
monetary  matters,  both  Germany  and  France  had  from  the 
outset  been  Russian  supporters.  Nevertheless,  our  loans 
came  to  be  welcomed  even  in  the  German  market,  besides 
those  of  England  and  America,  which  had  been  friendly  to  us 
from  the  beginning.  As  an  ally  of  Russia,  France  could  not 
open  her  market  to  us,  but  her  capitalists  vied  with  one 
another  in  subscription  on  the  British  and  American  markets. 

Other  continental  countries,  such  as  Belgium,  Switzerland, 
Holland,  etc.,  also  heartily  welcomed  the  loan.  Our  glorious 
victories  both  on  land  and  sea  so  highly  affected  the  feeling  of 
Americans  and  Europeans  that  our  government  attained  an 
unprecedented  success  in  the  subscription  to  loans.  Thus,  in 
the  second  subscription,  our  government  actually  realized 


8O         WAR   AND   ARMAMENT   LOANS:   HISTORICAL    SURVEY 

251,137,817  yen  against  a  nominal  issue  of  292,980,000  yen  of 
the  4.5  per  cent  sterling  loan. 

TEMPORARY  LOAN  FOR  REDEMPTION  OF  MILITARY  BILLS 

The  military  bills  had  been  issued  to  defray  war  expenses  at 
the  scene  of  action  as  well  as  to  accommodate  the  national 
Treasury,  when  enormous  national  outlays  and  foreign  pay- 
ments made  the  economy  of  metallic  currency  desirable.  They 
had  served  as  a  medium  of  payment  for  defraying  the  expenses 
in  connection  with  junks,  wagons,  horses,  coolies,  etc.,  in  a  dis- 
trict where  silver  coins  were  in  circulation,  and  were  exchanged 
for  one  yen  silver  coins  through  the  Yokohama  Specie  Bank. 
They  consisted  of  six  kinds  of  bills,  i.e.,  ten  yen,  five  yen,  one 
yen,  fifty  sen,  twenty  sen,  and  ten  sen  bills.  At  first,  100,000,- 
ooo  yen  was  fixed  as  the  maximum.  With  the  development  of 
the  war  the  amount  was  gradually  increased,  and  for  a  time 
reached  over  140,000,000. l  At  the  commencement  of  the  war, 
i.e.,  at  the  end  of  March,  1904,  the  amount  did  not  exceed 
2,459,600  yen,  but  at  the  end  of  March,  1905,  it  rose  to  70,125,- 
609  yen,  and  it  was  subject  to  numerous  fluctuations  later  on. 
After  the  restoration  of  peace  the  sum  of  15,253,358  yen  was, 
on  August  i  of  the  same  year,  borrowed  without  interest  from 
the  Yokohama  Specie  Bank,  in  accordance  with  Law  No.  I, 
March,  1906,  the  object  being  the  withdrawal  and  redemption 
of  the  military  bills.  The  above  explains  why  it  was  called 
the  temporary  loan  for  the  redemption  of  military  bills.  Dur- 
ing the  same  year,  3,038,025  yen  was  repaid  by  this  loan 
and  the  amount  unredeemed  at  the  end  of  the  fiscal  year 
1906  decreased  to  12,215,333  yen.  Since  then  they  have  been 
steadily  withdrawn,  so  that  at  the  end  of  the  fiscal  year  1912 
(the  first  fiscal  year  of  Taisho)  the  amount  unredeemed  stood 
at  1,979,517  yen.  The  following  table  shows  (in  yen)  the 
amount  of  military  bills  outstanding  and  unredeemed  at  the 
end  of  each  financial  year  since  1907: 


Fiscal  year  ending  1907 ....  4,984,568 
1908.  .  .  .  2,831,332 
1909 2,444,294 


Fiscal  year  ending  1910.  .  .  .  2,347,636 

1911 1,979,517 

1912 1,979,517 


1  War  Finance  Account  Report. 


RUSSO-JAPANESE   WAR   TO   PRESENT   DAY  8 1 

As  can  be  inferred  from  the  preceding  statement,  the  tem- 
porary loan  for  the  redemption  of  military  bills,  amounting  to 
1 5. 253»358  yen,  remained  as  a  burden  upon  the  general  an- 
nual account,  and  must  not  be  counted  among  the  extraordi- 
nary war  expenditures. 

MISCELLANEOUS  TEMPORARY  LOANS 

For  the  extraordinary  war  expenses,  appropriate  resources 
had  previously  been  chosen.  In  extraordinary  emergencies, 
like  wars,  it  is  unavoidable  that  ends  do  not  always  meet. 
Therefore,  as  a  measure  for  meeting  the  deficits,  whenever 
they  occurred,  the  government  'promulgated  Imperial  Ordi- 
nance No.  291,  1903,  Law  No.  I,  1904,  Law  No.  12,  1905,  and 
Law  No.  i,  1906.  In  accordance  with  these  laws  and  ordi- 
nance miscellaneous  floating  debts  were  incurred  several  times 
from  the  Bank  of  Japan  after  December,  1903,  under  the 
names  of  temporary  loan  for  defraying  armament  expenditures, 
temporary  loan  for  constructing  warships,  temporary  loan  for 
extraordinary  military  expenditures,  and  loan  for  the  redemp- 
tion of  military  bills,  which  latter  formed  the  subject  of  the 
preceding  sections. 

(i)   Temporary  Loan  for  Defraying  Armament  Expenditures 

This  loan  was  made  by  the  government  in  accordance  with 
Imperial  Urgency  Ordinance  No.  291,  December,  1903,  be- 
tween December  31,  1903,  and  June  31,  1904,  from  the  Bank 
of  Japan,  at  the  daily  interest  of  1.6  sen  per  100  yen.  Its 
amount  was:  1903,  7,000,000  yen',  1904,  34,500,000  yen]  total, 
41,500,000  yen. 

This  temporary  loan  was  liquidated  out  of  the  extraordinary 
war  expenditures  fund,  and  the  amount  outstanding  entirely 
disappeared  in  July,  1904. 

(2)   Temporary  Loan  for  the  Construction  of  Warships 

This  temporary  loan  was  also  borrowed  from  the  Bank  of 
Japan,  at  the  daily  interest  of  1.6  sen  per  100  yen,  by  Imperial 
Ordinance  No.  241,  December,  1903.  The  amount  borrowed 

7 


82         WAR   AND   ARMAMENT   LOANS:    HISTORICAL    SURVEY 

reached  in  1904  2,500,000  yen.     On  January  23,  1906,  it  was 
cleared  off  in  a  single  payment  out  of  the  war  fund. 

(3)   Temporary  Loan  j or  Extraordinary  Military  Expenditures 

This  loan  was  made  in  accordance  with  Law  No.  I,  Jan- 
uary, 1904,  Law  No.  12,  January,  1905, and  Law  No.  I,  March, 
1906,  and  was  borrowed  from  the  Bank  of  Japan  between  1904 
and  1906  as  a  temporizing  expedient  for  the  payment  of  the 
extraordinary  military  outlays.  Its  daily  interest  varied  from 
1.6  sen  to  2.2  sen,  and  the  amount  borrowed  was  (in  yen)  as 
follows : 

1904 182,000,000 

1905 126,125,000 

1906 65,125,000 

Total 373,250,000 

The  portions  borrowed  in  accordance  with  Law  No.  I ,  Jan- 
uary, 1904,  proved  to  be  182,000,000  yen  in  1904  and  57,000,- 
ooo  yen  in  1905,  both  of  which  were  paid  off  by  the  end  of  May, 
1905.  The  debt  contracted  in  accordance  with  Law  No.  12, 
1905,  was  69,125,000  yen  in  1905  and  9,625,000  yen  in  1906, 
and  the  total  sum  was  finally  liquidated  in  October,  1906. 
The  debt  incurred  in  accordance  with  Law  No.  i,.  March,  1906, 
was  55,500,000  yen,  which  was  finally  redeemed  in  July  of  the 
same  year.  It  may  easily  be  inferred  that  the  resources  for 
these  repayments  were  supplied  out  of  the  fund  raised  by  the 
public  loans  relating  to  extraordinary  war  expenditures. 

The  flotations  of  the  aforesaid  loans  were  measures  for  tem- 
porary accommodation  with  regard  to  the  extraordinary  war 
outlays,  and  every  one  of  them  was  readjusted  and  repaid  not 
later  than  the  settlement  of  the  extraordinary  war  expendi- 
tures. Therefore,  they  overlap  the  receipts  of  the  extraordi- 
nary military  expenditures  fund. 

CONCLUSION 

To  sum  up  what  has  been  said  in  the  foregoing  sections: 
From  the  Russo-Japanese  War  to  the  present  day  a  great 
amount  of  war  loans — but  not  armament  loans — have  been 


RUSSO-JAPANESE  WAR  TO  PRESENT  DAY 


floated.  The  war  loans  consisted  of  five  exchequer  bonds, 
four  sterling  loans  and  two  extraordinary  military  affairs 
loans  and  temporary  loans  for  the  redemption  of  military 
bills.  The  following  table  shows  the  amount  subscribed  and 
the  amount  actually  realized : 

SUMMARY  OF  LOANS  FROM  RUSSO-JAPANESE  WAR  TO  PRESENT  DAY1 


Kind 

Date  of 
Issue 

Inter- 
est 

Amount  Floated 

Net  Proceeds 

Exchequer  bonds,  ist 

Feb.  1904 
May,  1  904 
Oct.    1904 
Feb.  1905 
Apr.  1905 

May,  1  904 
Nov.  1904 
Mar.  1905 
July,  1905 

Mar.  and 
June, 
1906 

Per 
cent 

5 
5 
5 
6 
6 

6 
6 

4i 

4i 

5 

Yen                  Yen 
96,977,400               
98,876,650               
77,480,725               
99,790,575                
99,936,150 

Yen 
92,376,124 
90,981,796 
71,288,675 
90,254,962 
89,984,081 

Yen 

434,885,638 

689,594-570 
294,251,021 

Exchequer  bonds,  2d 
issue  

Exchequer  bonds,  3d 
issue      

Exchequer  bonds,  4th 

Exchequer  bonds,  5th 
issue  

6%  sterling  loan,  ist 
issue  

97,630,000                .... 
117,156,000                .... 
292,890,000                
292,890,000 

86,834,171 
100,463,595 
251,158,987 
251.137,817 

6%  sterling  loan,  2d 

4!%      sterling     loan, 

4i%  sterling  loan,  2d 

Special  5%  extraordi- 
nary   military    ex- 
penditure loan  

Total  

310,400,700     310,400,700 

294,251,021 

....    1,584,028,200 

1,418,731,229 

Temporary    loan    for 
the   redemption   of 

Aug.  1906 

o 

15,253.358 

15,253,358 

Of  the  above,  the  fourth  and  fifth  6  per  cent  exchequer 
bonds,  amounting  to  199,726,725  yen,  were  redeemed  by  the 
second  4  per  cent  sterling  loan,  amounting  to  £25,000,000,  or 
244,075,000  yen,2  which  was  floated  in  the  markets  of  England, 
America,  France,  and  Germany  in  November,  1905.  The 
second  4  per  cent  sterling  loan  was  floated  by  Imperial  Ordi- 
nance No.  241,  November,  1905,  in  accordance  with  Law  No.  I, 
1904,  and  Law  No.  12,  1905.  It  was  raised  without  any  secur- 

1  This  table  was  made  on  the  basis  of  the  figures  as  shown  in  the  preceding  sections. 
The  total  sum  of  the  net  proceeds  of  the  exchequer  bonds,  the  sterling  loans  and  ex- 
traordinary military  expenditures  loans  are  the  same  as  the  settled  amount  of  public 
loans  exchequer  bonds,  temporary  loans  in  the  fund  revenue  belonging  to  the  special 
extraordinary  military  expenditures  account  as  stated  in  the  general  review  above. 
This  shows  that  the  total  amount  of  the  money  realized  was  transferred  to  the  war 
fund. 

1  The  amount  actually  realized  was  214,720,000  yen. 


84        WAR  AND   ARMAMENT   LOANS:   HISTORICAL    SURVEY 

ity.  The  issue  price  was  90,  and  the  rate  actually  received 
was  88.  The  principal  was  to  be  redeemed  not  later  than 
January  I,  1931.  But  on  and  after  January  i,  1921,  the 
whole  or  a  part  of  it  could  be  redeemed  at  the  convenience  of 
the  government  with  six  months'  notice.  The  amount  actu- 
ally received  was  214,720,000  yen,  and  after  the  redemption  of 
the  fourth  and  fifth  exchequer  bonds  a  small  amount  of  surplus 
(about  54,376,000  yen)  was  left  over.  The  first,  the  second, 
and  the  third  5  per  cent  exchequer  bonds  amounting  to  273,- 
334)775  yen>  were  mostly  redeemed  by  the  surplus  of  the 
foreign  loans  and  of  the  ordinary  revenue,  while  a  part  of  them 
was  redeemed  out  of  the  5  per  cent  public  loan  for  the  read- 
justment of  exchequer  bonds,  amounting  to  31,001,050  yen 
floated  in  the  home  market  in  March,  1908,  and  out  of  the  4 
per  cent  loan  issued  in  Paris  in  April,  1910,  amounting  to 
1 75 -1 50,ooo  yen. 

At  the  same  time  14,292,500  yen,  which  had  been  raised 
for  the  establishment  of  the  tobacco  monopoly  by  Law  No. 
14,  March,  1904,  was  redeemed.  Loans  for  the  readjustment 
of  exchequer  bonds  disappeared  as  they  were  displaced  by  the 
Imperial  5  per  cent  loan,  Class  B.  Thus,  with  the  exception 
of  the  Korean  undertaking  loan,  floated  in  accordance  with 
the  Law  No.  18,  March,  1911,  amounting  to  30,000,000  yen, 
all  the  exchequer  bonds  disappeared  in  1911.  Until  the  settle- 
ment of  the  war  expenses  (October  31,  1907),  however,  the 
second  4  per  cent  sterling  loan,  amounting  to  199,726,725  yen, 
and  unredeemed  exchequer  bonds,  amounting  to  273,334,775 
yen,  existed  side  by  side  with  the  extraordinary  military  ex- 
penditures loans  and  4  per  cent  sterling  loan.  Of  the  four 
sterling  loans,  the  first  and  second  6  per  cent  sterling  loans, 
amounting  to  215,260,000  yen,  were  redeemed  by  the  5  per 
cent  sterling  loan,  amounting  to  224,549,000  yen,  which  was 
raised  in  accordance  with  Imperial  Ordinance  No.  23,  March, 
1907.  The  foreign  loans,  on  account  of  the  Russo-Japanese 
War  existing  at  the  present  day,  are  the  second  4  per  cent 
sterling  loan  (for  the  conversion  of  exchequer  bonds),  the  5 
per  cent  sterling  loan  and  the  first  and  second  4  per  cent  ster- 


RUSSO-JAPANESE   WAR  TO   PRESENT  DAY 


ling  loans.  Thus,  the  war  loans,  on  account  of  the  Russo- 
Japanese  War,  were  modified  in  kind,  in  amount  of  flotations 
and  in  the  distinction  between  domestic  and  foreign  loans 
before  the  settlement  of  the  war  expenses  in  October,  1907. 

Russo- JAPANESE  WAR  LOANS  l 


Former  War  Loans 

Amount 

Latter  War  Loans 

Amount 

5%  exchequer  loan.  .  .  . 
6%          "              M    ... 

Yen 

•    273,334,775 
IQQ.726.72S 

5%  exchequer  loan.  .  . 
4%  sterling  loan  

Yen 

273,344,775 

244.,  07^,000 

Extraordinary  military 
expenditure  loan  .... 
6%  sterling  loan  

310,400,700 
215,260,000 

Extraordinary  military 
expenditure  loan  .  .  . 
5%  sterling  loan  

3IO,4OO,7OO 
224.S4Q.OOO 

4% 

S8s,  78o,OOO 

4% 

S8S.  78O,OOO 

Total  

1,584,502,200 

Total  

I  6^8.14.0  4.75 

Foreign  loan  

801,040,000 

Foreign  loan  

1  ,0^4.,  4.O4.  OOO 

Besides  the  above-mentioned  loans  for  war  and  armament, 
there  were  many  other  public  loans  in  the  period  from  the 
Russo-Japanese  War  to  the  present  day. 

All  these  loans  may  be  divided  into :  (a)  financial  public  loans, 
(&)  public  loans  with  regard  to  the  nationalization  of  railways, 
and  (c)  public  loans  with  regard  to  the  amalgamation  and 
financing  of  the  colonies.  As  for  financial  public  loans  there 
were  issued  the  tobacco  monopoly  exchequer  bonds,  after  1904, 
amounting  to  14,292,050  yen,  consolidated  loan  for  hereditary 
pension,  after  1905,  amounting  to  441,500  yen,  the  Okina- 
waken  Pension  Bonds,  after  1910,  amounting  to  1,639,800  yen, 
and  the  salt  fields  adjustment  loans  in  1911,  amounting  to 
2,426,050  yen.  The  French  loan  in  1910,  amounting  to  175,- 
150,000  yen,  and  the  third  4  per  cent  sterling  loan,  amounting 
to  107,393,000  yen,  were  both  floated  for  the  conversion  and 
readjustment  of  the  domestic  and  foreign  loans.  As  for  the 
public  loans  for  the  nationalization  of  railways,  there  were 
public  loans  for  the  readjustment  of  the  liabilities  of  old  rail- 

1  In  addition,  there  was  an  issue  of  a  relief  loan,  1910,  amounting  to  988,650 
yen.  As  its  object  lay  in  the  postbellum  relief  work,  it  may  properly  be  regarded 
as  an  addition  to  the  extraordinary  military  expenditures  loan. 


86        WAR  AND  ARMAMENT   LOANS:   HISTORICAL   SURVEY 

way  companies,  amounting  after  1906  to  27,683,850  yen,  the 
public  loan  for  the  buying-up  of  the  railways  after  1909, 
amounting  to  476,318,750  yen,  the  amount  which  the  govern- 
ment assumed  of  the  liabilities  of  the  old  railway  companies, 
amounting  to  22,132,900  yen  after  1906,  the  seal-fishers  bonds, 
in  1912,  amounting  to  501,400  yen,  the  sterling  loan  on  account 
of  the  liabilities  in  regard  to  the  old  railway  company,  in  1906, 
amounting  to  13,668,000  yen,  and  the  French  exchequer  bonds 
and  sterling  railway  bonds,  after  1913,  amounting  to  106,389,- 
ooo  yen,  which  were  raised  for  the  construction  and  improve- 
ment of  railways.  As  for  the  public  loans  with  regard  to 
colonies,  there  were  the  Korean  Public  Undertakings  Loan  in 
1912,  amounting  to  1,000,000  yen,  Public  Loan  granted  by  the 
former  Korean  Government  to  the  former  Dosho,  amounting 
to  116,825  yen,  Onshi  Loan  Bonds  granted  to  the  former 
Koreans  in  1912,  amounting  to  30,037,400  yen,  and  Chosen 
Public  Works  Exchequer  Bonds  in  1913,  amounting  to  30,000,- 
ooo  yen.  Besides  these,  there  were  no  small  amount  of  tem- 
porary loans.  Such  is  the  outline  of  our  national  loans  from 
the  Russo-Japanese  War  down  to  the  present  day. 


CHAPTER  VI 
PRESENT  AMOUNT  OF  PUBLIC  LOANS 

In  order  to  discuss  the  financial  position  and  the  economic 
effects  of  war  and  armament  loans,  it  is  necessary  to  know  the 
mode  of  flotation  of  our  national  loans  as  a  whole  and  their 
present  condition.  The  national  loans  as  a  whole  are  gener- 
ally divided  into  ordinary  public  loans  and  floating  loans  or  in- 
to foreign  and  domestic  loans.  Each  kind  of  loan  has  had  its 
peculiar  mode  of  development,  and  the  influence  of  each  upon 
economic  affairs  is  different  one  from  another.  Further,  if  we 
classify  according  to  objects  of  flotation,  public  loans  may  be 
divided  into  loans  for  the  reform  of  institutions,  loans  for  ad- 
justment of  finance,  loans  for  war  and  armament,  loans  for  the 
encouragement  of  industries  and  colonial  loans,  etc.  Unless, 
therefore,  we  classify  the  statistics  according  to  these  divisions, 
it  is  impossible  for  us  to  know  the  financial  position  of  war  and 
armament  loans  and  the  effects  of  general  finance  and  business 
brought  about  by  their  flotation,  redemption,  readjustment, 
and  interest  payment.  In  short,  the  object  of  this  chapter 
consists  in  summarizing  the  facts  and  statistics  of  the  preced- 
ing chapters,  thus  clarifying  the  financial  position  of  the  war 
and  armament  loans  and  at  the  same  time  preparing  the  minds 
of  the  readers  for  the  discussion  of  the  economic  effects  in  the 
following  chapters. 

HISTORICAL  STATISTICS  OF  NATIONAL  DEBT 

In  stating  the  historical  statistics  of  the  total  amount  of 
national  loans,  we  must  first  distinguish  between  statistics 
concerning  the  floated  sum  and  statistics  concerning  the 
redeemed  sum;  and  then  we  must  state  the  unredeemed 
amount  outstanding  at  the  end  of  each  fiscal  year. 

87 


88         WAR   AND   ARMAMENT   LOANS:   HISTORICAL    SURVEY 

The  amount  floated  resolves  itself  into  the  subscribed 
amounts  and  special  issue  amounts.  By  subscribed  amounts 
is  meant  the  amounts  raised  by  general  flotation  to  the  public 
at  large,  while  by  special  issue  amounts  is  meant  the  amount 
raised  by  issue  of  loans,  in  which  delivery  is  made  directly  to 
the  person  entitled,  or  in  which  special  issue  is  made  to  the 
Deposit  Section  or  other  special  funds,  or  in  which  a  new  loan 
is  delivered  in  conversion  of  an  old  loan.  We  must  distin- 
guish these  two,  because  their  influences  on  the  contraction  of 
currency  and  slackness  of  the  money  market  are  by  no  means 
identical.  Floated  amounts  may  also  be  subdivided  into 
domestic  and  foreign  flotations,  and  this  distinction  is  neces- 
sary inasmuch  as  their  respective  influences  on  finance  and 
business  are  different. 

Lastly,  the  redeemed  amounts  must  be  subdivided  into 
those  redeemed  out  of  the  general  revenue,  and  those  re- 
deemed out  of  the  public  loans  fund,  floated  for  the  sake  of 
conversion.  It  was  frequently  the  case  that  great  amounts 
of  redemption  and  great  amounts  of  fresh  subscriptions  took 
place  nearly  simultaneously.  The  distinction  between  those 
redeemed  out  of  the  general  revenue,  and  those  redeemed  out 
of  the  public  loans  fund  can  not  be  said  to  be  very  clear ;  but 
their  respective  influences  are  not  the  same,  because  the  for- 
mer kind  of  redemption  greatly  diminishes  the  total  sum  of 
issue,  and  gives  rise  to  slackness  in  the  money  market,  while  the 
latter  kind  of  redemption  increases  the  total  amount  of  public 
loans,  and,  except  when  domestic  loans  are  converted  into 
foreign  loans,  it  has  not  the  effect  of  slackening  the  money 
market. 

The  following  table1  shows  the  amounts  of  ordinary  and 
floating  loans  at  the  end  of  each  year: 

1  Based  on  Reference  Book  Concerning  Monetary  Affairs,  National  Loans  Sta- 
tistics, and  Imperial  Statistical  Year  Book.  The  amounts  of  floating  loans  are  the 
sum  total  of  government  paper  money,  various  temporary  loans,  exchequer  bonds, 
and  railway  bonds.  Ordinary  loans  are  generally  funded  loans. 

Prior  to  1885,  the  system  of  fiscal  years  was  not  yet  firmly  established,  and  the 
figures  are  shown  as  those  of  each  year  end.  After  1886,  the  present  system  of 
fiscal  years  was  adopted.  Per  capita  amount  is  not  necessarily  in  ratio  to  the 
total  amount,  first  because  it  denotes  the  figures  at  each  year  end,  and  secondly 
because  paper  money  was  excluded  from  the  calculations. 


PRESENT  AMOUNT   OF   PUBLIC  LOANS 
LOANS  BY  YEARS 


89 


Year* 

Ordinary  Loans 

Floating  Loans 

Total 

Per  Capita 

1868  

Yen 

Yen 

24  O^7  "^89 

Yen 
24  0^7  ^80 

Yen 

1860.  . 

5O,O9O,867 

50,090,867 

1870.  . 

4,880,000 

55,5OO,OOO 

60,380,000 

O  147 

I87I  .  . 

4,880  ooo 

60  272  ooo 

65  152  ooo 

O  147 

1872  

28,056,096 

68,4OO,OOO 

96,456,096 

o  84^ 

1873.  . 

4.0,64.0,84.1 

78.381.013 

119,021,854 

I  2O9 

l874.  . 

4.6,919,6^7 

91,902  ooo 

138  821,637 

i  -*8o 

1875.  . 

55  8lO,I92 

QO  O7  1  860 

154  882  06  1 

I  625 

1876.  . 

53,927,344 

105,147,582 

1  59,074,926 

I  557 

1877.  . 

226,8S4,^89 

115,283,091 

^42,  1^7,  480 

6  772 

1878  

2l7,l64,l66 

I  54  418.592 

•7QI  782  758 

7  O5^ 

1879.  . 

235,198,759 

145,^08,921 

•;8O.5O7,68O 

6  96^ 

1880  

214,  Il8,  211 

1  10  ,040,485 

174,278,716 

6  858 

1881  

211.  127,54.1 

111  QO5.IQ4 

l65  O12.715 

6  7O7 

1882  

225,511,284. 

I24,l60,OI4 

140i88o,208 

6  497 

1883.  . 

217,662,889 

107,000,277 

325,662,166 

6  O79 

l884.  . 

2^O.';';4.9I4 

ioi  180.211 

•j-'-i.7I5  147 

6  -187 

1885.  . 

231,255,987 

08,145,006 

329,601,083 

6.457 

1886  

230,681,580 

76.105,045 

-;O7,O77,525 

6  Oil 

1887.  . 

2^7  694.,  192 

63  565  988 

3OI,26O  I  8O 

7  Oil 

1888  

241.438,310 

55,468,455 

206,006,765 

6  707 

1889.  . 

24.5.44.5,566 

5O,O65,256 

205.5IO.822 

6  406 

1890  

243,230,655 

63,370,072 

106,  600,727 

6.804 

1891.  . 

241,741,700 

58,873,789 

lOO,6l7,4Q8 

ft  *7AA 

1892  

235,126,272 

51,200,044 

286,326,316 

6.762 

189-?.  . 

2^5,814,851 

47,704,77-; 

283,519.624 

6  .446 

1894..  . 

26^,807,284 

65  52O.5I7 

120,^27,801 

6  774 

1895  

341,759,995 

78,570,216 

420,339,231 

Q.276 

1896.  . 

157,^5,1^4 

62,045,082 

419,380,216 

IO.OOI 

1897  

399,245,928 

28,995,374 

428,241,302 

9  .024 

1898  

•*9i,25-*,i23 

27,112,265 

418,365,388 

8.94O 

1  899  .  . 

48O,Q67,24Q 

27.'*99,45'* 

508,  •;  66.702 

IO  714 

1900.  . 

486,460,195 

23,728,883 

510,189,078 

11.086 

I9OI  .  . 

502,226,140 

67,891,816 

570,117.956 

ii  .911 

igO2  

530,180,810 

55,983,447 

586,164,257 

12.185 

I9CU  .  . 

5-19,569.751 

42,  514,-;  59 

582,084,110 

12  .OI7 

I  QO4.  . 

060,288  no 

Il6  628,616 

1,085,916,755 

22  26l 

1905  .  . 

1,850,381,121 

243,200,000 

2,093,581,121 

AA  640 

I  QO6  .  . 

2,420,256,082 

I-*O.4I  5,  Wl 

2,550,671.415 

48  .247 

1907  

2,254,346,452 

22,OOO,OOO 

2,276,346,452 

47  .  302 

1908.  . 

2,228,306,822 

27,5O5,O95 

2,255,811,917 

46  .  439 

1909  

2,582,798,36-; 

68,435,291 

2,651,233,654 

53  •  804 

1910  

2,650,^95,115 

129,986,100 

2,780,381,215 

55  .OO7 

I9II  .  . 

2,551.704.071 

188,474,946 

2,742,179,919 

54.O22 

1912  

2,493,969,745 

249,600,969 

2,743,570,714 

51  .796 

s  Up  to  1885,  the  figures  are  for  the  calendar  year  ending  with  the  date  given; 
from  1886  on,  the  fiscal  year  ending  with  the  date  given. 

The  table  on  the  next  page  shows  how  our  national  debts, 
which  increased,  as  above  stated,  both  in  the  total  amount  and 
per  capita  amount,  were  floated,  issued,  and  redeemed. 


9O        WAR  AND  ARMAMENT  LOANS:   HISTORICAL   SURVEY 

FLOTATION  AND  REDEMPTION  OF  NATIONAL  DEBTS1 


Year  8 

Domestic 
Flotation 

Foreign 
Flotation 

Amount 
Issued 

Total 

Redemption 
of  Principal 

The  3d.... 
The  4th  ... 
The  5th... 
The  6th  ... 
The  7th  ... 
The  8th  ... 
1875.  . 

Yen 

Yen 
4,880,000 

11,712,000 

Yen 

23,390,90° 
1,580,200 
6,986,200 

10,230,550 

Yen 
4,880,000 

35,102,900 
1,580,200 
6,986,200 

10,230,550 

Yen 

219,454 
707,454 
707,454 

1,339,995 

1876.  . 

7,400 

7,400 

1,890,249 

1877  

334,050 

334,050 

975,855 

1878.  . 

12,500,000 

173,221,895 

185,721,895 

3,475,274 

1879  

291,627 

291,627 

3,575,757 

1  880  

3,044,525 

3,044,525 

3,796,854 

1881  

821,915 

821,915 

2,949,289 

1882  

513,855 

513,855 

7,864,207 

1883.  . 

15,000,000 

1,787,650 

16,787,650 

5,425,294 

1884.  . 

5  000,000 

S,995 

5,003,995 

4,290,101 

188s.  . 

6,515,635 

6,515,635 

5,089,752 

1886  

21  000,000 

607,240 

21,607,240 

21,022,267 

1887.  . 

2  OOO,OOO 

27,838,790 

29,838,790 

26,457,542 

1888  

1  1  OOO,OOO 

22,^95,270 

-1-1,195,270 

31,198,368 

1889.  . 

IQ.OOI.2Q5 

19,001,295 

15,885,758 

l8QO.  . 

^,  ^40,8QO 

^,^40.800 

5,^61,401 

1891  

4.,  q  1  7,  -ZOO 

14,549,150 

19,462,450 

24,157,111 

1  892  .  . 

IO,OOO,OOO 

30,960,400 

40,960,400 

49,596,238 

189-?.  .  .  . 

2,OOO,OOO 

17,842,950 

19,842,950 

13,318,870 

1894.  . 

79  996,500 

2,000,000 

81,996,500 

4,108,798 

1895.  .  .  . 

10  000,000 

-IT,  047,  500 

4.^,04.7,500 

4,OOO,O5Q 

i  896  .  .  . 

1  1,605.000 

1^,695,000 

8,120,310 

1897.  . 

40,1  57,QOO 

4.0  I  57.9OO 

7,288,107 

1898.  . 

26^,750 

26^  750 

8,215,555 

1  899  

97.6^0,000 

^,72Q,OOO 

101,-*  59,000 

11,644,874 

1900  

IS,  272.6SO 

15,272,650 

9,775,  705 

1901  

26,002,650 

26,002,650 

10,240,705 

1902  .  . 

4.1,4.08,150 

4.1,4.98  150 

1^.795.880 

190-;.  . 

96.077  25O 

1  2  OOO  OOO 

108,977  25O 

3218  290 

IOO4.  . 

276  14.7  975 

800  566  ooo 

1  7  4.O4.  8^5 

i  094  1  18  810 

210  455 

1905.  . 

2QQ  6O7  7  5O 

24.4.  O75  OOO 

8  869  150 

552  551  QOO 

40  472  17"* 

1906  

IOO 

132,266,650 

132,266,750 

176.0^,122 

1907  

IOO 

224..  54.9,  OOO 

88  848,890 

T.I-3..T.Q7  qqo 

247,206.460 

1908  

I  50 

72,081,014 

72  08  1  164 

07  207  O^O 

1909  

4.87,211,74.0 

4.87  211  74.0 

I  ^O  I  ^4  OOO 

1910.  . 

521  ^7O  575 

521  ^7O  575 

4.C-J  770  77-2 

I9II  .  . 

5  54.1  7OO 

5  54.1  7OO 

IO2  2^1  84^ 

1912  .  . 

I  IOO  OOO 

I  IOO  OOO 

60  8i5  228 

JQI7  .  . 

77  400  ooo 

•IQ  7Q8  250 

108  198  250 

1:7  O4.7  7Q6 

% 

a  Up  to  the  eighth  year,  the  figures  are  for  the  fiscal  period  ending  with  the 
date  given;  from  1875  on,  the  fiscal  year  ending  with  the  date  given. 

1  Based  on^  an  investigation  of  the  Department  of  Finance.  The  amount 
redeemed  assignable  to  the  eighth  period  is  not  ascertainable,  on  account  of  poor 
arrangement  of  the  materials,  and  has  been  included  either  in  the  seventh  period  or 
in  the  fiscal  year  1875.  The  table  does  not  include  exchequer  bonds,  railway 
bonds,  and  temporary  loans. 


PRESENT  AMOUNT   OF   PUBLIC   LOANS 


The  following  table  shows  the  amounts  redeemed  of  the 
domestic  and  foreign  loans  respectively  at  each  year  end,  or 
at  the  end  of  each  fiscal  year: 


REDEMPTION  OF  LOANS  l 


Yeara 

Domestic  Loans 

Foreign  Loans 

Total 

1870  

Yen 

Yen 
4  880  ooo 

Yen 
4  880  ooo 

1871  .  . 

4  880  ooo 

4  880  ooo 

1872  

23  176  096 

4  880  ooo 

28  056  096 

187-?.  . 

24,516,841 

16,104,000 

40,640,841 

1874.  . 

11,101,617 

15  616,000 

46  oio  617 

1875.  . 

4O.Ql6  412 

14  80^  760 

55  8lO  102 

1876.  . 

10,771,028 

14,1  55,4l6 

51,027,144 

1877.  .     

21^,  455,  ^7^ 

ii  100,016 

226,854,180 

1878.  . 

224.  74O  O04 

12  624,072 

2^7,^64,166 

1879  

22^,^6Q,6^Q 

11,829,120 

2^5,108.750 

1  880  

22^,  ^25.  5^5 

11,012,696 

2^4,  ^8,  2^1 

1881  

22O  054,205 

TO  171  Il6 

2^1,127.541 

1882  

216,202,196 

q,  100,088 

225,511,284 

1881.  . 

208,756.401 

8,906,488 

217,662,889 

1884  

221  385  842 

8  476  072 

229,861,914 

1885.  . 

221,  240,587 

8,015,400 

231,255,987 

1886  

22^.1  50.548 

7.522,0^2 

230,681,580 

1887.  . 

230,699,688 

6.004,504 

237,694,192 

1888  

229,686,718 

6,410,176 

216,117,094 

1889  

2l8  4OO  752 

5  826,232 

244,226,084 

1890  

212,868,410 

5,188,120 

238,056,550 

1891  

217.255,085 

4,488,624 

241,741,709 

1892  

211,177,456 

1,748,816 

235,126,272 

1893.  . 

212,857,571 

2,057,280 

235,814,851 

iSQA.  . 

261,697,171 

2,1  IO,II2 

261,807,281 

1895  

140,556,587 

1,203,408 

341,759,995 

1806.  . 

157,101,182 

211,752 

157,115,114 

1897  

139,245,928 

399,245,928 

1898.  . 

101,251,121 

391,253,123 

l800  .  . 

4.80,067,24.0 

480,967,249 

IQOO.  . 

188,814,194 

97,630,000 

486,464,194 

IQOI  .  . 

4O4-,  506,I4.O 

97,6lO,OOO 

502,226,140 

1902  .  . 

412,550,810 

97,630,000 

530,180,810 

IQO'*  .  . 

441,919,751 

97,6lO,OOO 

539,569,751 

I  QO4.  . 

656,872,1^0 

312,416,000 

969,288,139 

IQO5  .  . 

879,970,810 

97O,4IO,3IO 

1,850,381,121 

1  906  

1,040,546,602 

I,17O,7O9,579 

2,420,256,182 

IQO7  .  . 

1,088,645,228 

1,165,701,224 

2,254,146,452 

1908  

1,062,605,598 

1,165,701,224 

2,228,306,822 

IQOQ  .  . 

1,417,128,864 

1,165,675.449 

2,582,804,313 

igiO  

I,2O1,I7Q,1QO 

1,447,21  5,71  5 

2,650,395,115 

IQII  .  . 

I,Il6,2l6,27O 

1,417,449,201 

2.55^,665,473 

IOI2  .  . 

1,066,286,840 

1,427,682,005 

2.  493>969,  745 

B  Up  to  1885,  the  figures  are  for  the  calendar  year  ending  with  the  date  given; 
from  1886  on,  the  fiscal  year  ending  with  the  date  given. 
1  This  table  is  concerned  merely  with  ordinary  loans. 


92         WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 


The  above  tables  show  that  our  national  loans  increased 
with  every  war,  and  especially  in  connection  with  the  Russo- 
Japanese  War,  after  which  our  finance  changed  from  domestic 
loan  finance  to  foreign  loan  finance. 

As  we  have  finished  the  historical  statistics  of  the  total  sum 
of  our  national  debts,  we  enter  upon  the  minute  observation  of 
the  total  sum  of  national  debts  at  the  present  time. 

OUTSTANDING  NATIONAL  DEBT 

The  following  table  shows  the  details  of  all  the  national  debts 
outstanding  at  the  present  time: 

DETAILS  OF  NATIONAL  DEBT 

A . — Domestic  Loans 


Kinds 

Date  of 
Flotation 

Amount  of 
Flotation 

Amount 
Outstanding 

Date  of 
Redemption 

Old  Public  Loan  (without  interest)  .  .  . 
Imperial   Japanese    Government    5% 
Loan,  51,427,400    yen  outstanding, 
divided  as  follows: 

1872 
From  1893 

Yen 
10,972,725 

64  866  050 

Yen 
1,975,091 

5  588  900 

1921 

Hokkaido  Railway  Loan  

"      1898 

4,403,650 

811,150 

1961 

Public  Undertaking  Loan  

"      1897 

88,827,800 

10,831,400 

1961 

Consolidated  Loan  for  Hereditary 
Pension  

"      1905 

441,500 

164  250 

1966 

Taiwan      Public      Undertakings 
Loan  

"      1900 

34,508  535 

385  650 

1960 

Loan  for  Consolidating  the  Debts 
of  the  Purchased  Railway  Co.  . 
Okinawa       Prefecture       Pension 
Bonds  

1906 
"      1910 

27,683,850 
1,639,800 

27,683,850 
1,640,550 

1963 

1964 

Public  Loan  Bonds  issued  for  the 
relief  of  the  Japanese  who  suf- 
fered loss  during  the  late  war.  . 
Public  Loan  for  the  Readjustment 
of  the  Salt  Fields  

"      1910 
"      1911 

988,650 
2,426,050 

979,350 
2,425,750 

1964 
1964 

Bonds  to  Sealers      .         

1912 

1966 

5%  Nationalization  of  Railway  Loan 
(Mark  ko)  

"      1908 

5%  Extraordinary  Military  Expendi- 
tures Loan  (Special)  

"      1906 

310,400,700 

239,885,850 

1935 

5%  Loan  (Onshi)  

"      1910 

29  826  ooo 

Debentures  of  the  Purchased  Railway 
Companies  

Sept.,  1907 

22,132,900 

100,000 

1913  (Nov.) 

4%  Loan  

From  1910 

276,028  850 

276  028  850 

Total  

I  066  286  841 

PRESENT  AMOUNT   OF   PUBLIC   LOANS 
B. — Foreign  Loans 


93 


Kinds 

Date  of 
Flotation 

Amount  of 
Flotation 

Amount 
Outstanding 

Date  of 
Redemption 

4%  Sterling  Loan  of  ist  issue,  97  ,630,- 
ooo  yen  floated    and    outstanding, 
divided  as  follows: 
Railway  Loan    

1899 

Yen 
17,577,750 

Yen 
17,577,750 

1953 

Hokkaido  Railway  Loan  

1899 

2,000,000 

2,000,000 

1953 

1809 

4%  Sterling  Loan  of  2d  issue  

1905 

244  075  ooo 

244  072  266 

Jan.,   1931 

4%  Sterling  Loan  of  3d  issue  

1910 

107,393,000 

107,393  ooo 

June,  1970 

4J%  Sterling  Loan  of  ist  issue  
4i%  Sterling  Loan  of  2d  issue. 

1905 
1905 

292,890,000 

283,106,498 

Feb.,  1925 
July    1925 

5%  Sterling  Loan    

1907 

224  549  ooo 

224  545  876 

Mar.,  1947 

4%  Loan  (issued  in  Paris)  

1910 

175,150  ooo 

174  147  485 

May,  1970 

Debentures  of  the  Purchased  Railway 
Co  

1  906  and 

13,668  200 

13  668  200 

1921  and 

1907 

1926 

Total  

T  /1/|S  '45  2O« 

i  427  682  905 

C. — Floating  Loans 


Kinds 

Date  of 
Flotation 

Amount  of 
Flotation 

Amount 
Outstanding 

Date  of 
Redemption 

Railway  Bonds  and  Debentures  (daily 

Yen 

Yen 

Temporary    Loans,    135,311,069    yen 
floated  and  outstanding,  divided  as 
follows: 
Temporary  Loan  for  the  Redemp- 
tion of  Paper  Money  (without 
interest)  

1890 

22,000  ooo 

22  OOO  OOO 

1912 

Temporary  Loan  (daily  interest)  . 
Taiwan    Undertakings    Expendi- 
ture Changed  Temporary  Loan 
(6%)  

Each  year 

11,530,000 

5  266  743 

One  year 

Temporary  Loan  for  the  Redemp- 
tion of  Military  Bills  (without 

15  253  358 

1  979  517 

No  date 

Railway  Work  Expenditure  Tem- 
porary Loan  (4i%)       

From  1909 

33  577.H3 

Each  5  years 

Korean  Undertaking  Fund  Tern- 

17  963  920 

Imperial  Steel  Works  Fund  Tem- 
porary Loan  (4i%)       

"      1911 

4,000  ooo 

2  000,000 

,, 

Chosen  Undertaking  Expenditure 
Temporary  Loan  (5%)  

"      1911 

2,094,677 

2,094,677 

3  years 

Chosen  Undertaking  Expenditure 
Changed  Temporary  Loan  (6%) 
River    Work    Fund    Temporary 
Loan  (4$%)  

From  1911 
"      1912 

24,900,000 
14,000,000 

24,900,000 
14,000,000 

3  years  each 
5  years 

Total  

182,500,955 

249,600,970 

94        WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 

SUMMARY  OF  AMOUNT  OUTSTANDING 

Yen 

A — Domestic  Loan 1,066,286,841 

B — Foreign  Loan 1,427,682,905 

C — Floating  Loan 249,600,969 

Total 2,743,570,715 


The  following  table  shows  the  amount  and  position  of 
war  and  armament  loans  viewed  from  the  object  of  their 
flotation  : 

A.  —  Loans  for  Reorganization  of  Institutions:  Yen  Yen 

Old  Public  Loan  ..........................         1,975,090 

Consolidated  Loan  for  Hereditary  Pension..  .  .  164,250 

Okinawa  Prefecture  Pension  Bonds  ..........         i  ,640,550 

3,779,890 

B.  —  Loans  for  War: 


Sterling  Loan  of  1st  issue  ..............  566,226,078 

4%  Sterling  Loan  of  2d  issue  ...............  244,072,266 

5%  Extraordinary  Military  Expenditure  Loan  239,885,850 

5%  Sterling  Loan  ..........  .  ..............  224,545,876 

Public  Loan  issued  for  the  relief  of  the  peoples 

who  suffered  loss  during  the  late  war  ........  979,350 

4%  Loan  (Part  I)  .........................  1  13,398,950 

4%  Loan  issued  in  Paris  (Part  I)  ...........  63,810,875 

Temporary  Loan  for  Redemption  of  Military 

Bills  ...................................  1,979,517 

1,454,898,762 

C.  —  Loans  for  Expansion  of  Armament: 

4%  Sterling  Loan  of   1st  issue,   1899   (Public 

Undertaking  Loan,  Part  I)  ...............  54,947,100 

4%  Loan  (Part  II)  ........................  8,296,700 

63,243,800 

D.  —  Loans  for  Railway  Construction  and  Public  Works: 

Railway  Loan  (Domestic  and  Foreign)  .......  23,166,650 

Hokkaido  Railway  Loan  (Domestic  and  For- 

eign) ..................................  2,811,150 

Public  Undertaking  Loan  (Domestic  Loan  and 

Foreign  Loan,  Part  II)  ..................  33,936,550 

4%  Loan  (Part  III)  .......................  98,462,050 

5%  Nationalization  of  Railway  Loan  ........  467,043,650 

Debentures  of  the  Purchased  Railway  Com- 

panies (Domestic  and  Foreign)  ...........  13,768,200 

Loans  for  Consolidating  the  Debts  of  the  Pur- 

chased Railway  Co  ......................  27,683,850 

Railway  Bonds  and  Debentures  .............  79,289,000 

Railway  Work  Expenditure  Temporary  Loan  .  33,577,113 
The  Imperial  Steel  Works  Fund  Temporary.  .  . 

Loan  ..................................  2,000,000 

The  River  Work  Fund  Temporary  Loan  ......  14,000,000 

Bonds  to  Sealers  ..........................  916,550 

796,654,763 


PRESENT   AMOUNT   OF   PUBLIC   LOANS  95 

E. — Loans  for  Exploitation  of  New  Territory: 

Taiwan  Public  Undertaking  Loan 385,650 

Taiwan  Undertaking  Expenditure  Temporary 

Loan 5,266,743 

Korean  Undertaking  Fund  Temporary  Loan.  .  17,963,920 
Chosen    Undertaking    Expenditure    Changed 

Temporary  Loan 24,900,000 

Chosen  Undertaking  Expenditure  Temporary 

Loan 2,094,677 

5%  Loan  (Onshi) 29,826,000 

80,436,990 

F. — Loans  for  Financial  Adjustment  and  Treasury  Bonds: 
Public  Loan  for  the  Readjustment  of  the  Salt 

Field 2,425,750 

4%  Sterling  Loan  of  3d  issue  (Part  II) 107,393,000 

4%  Loan  issued  in  Paris  (Part  II) 110,336,610 

4%  Loan  (Part  IV) 55,871,150 

Temporary  Loan  for  the  Redemption  of  Paper 

Money 22,000,000 

Temporary  Loan  (daily  interest) 11,530,000 

Treasury  Bonds 35,000,000 

344-556,510 

Total 2,743,570,715 


This  classification  differs  from  the  classification  adopted  in 
the  Financial  Department's  annual  statistical  report,  pub- 
lished since  1901 ,  with  regard  to  national  loans.  In  this  annual 
report  conversion  loans  are  regarded  as  financial  readjustment 
loans  and  unfunded  loans  excluded.  In  these  statistics,  on  the 
contrary,  any  loan  that  can  be  looked  upon  as  a  loan  for  the 
conversion  of  war  loans  is  regarded  as  war  or  armament  loan, 
and  also  unfunded  loans  are  included.  The  reader  is  referred 
to  the  note  in  the  following  table  for  particulars. 

WAR  AND  ARMAMENT  LOANS 

The  figures  with  regard  to  war  and  armament  loans  are 
different,  according  to  the  views  taken.  We  have  made  a 
special  investigation  on  the  basis  of  the  above  classification, 
which  has  convinced  us  of  the  approximate  truth  of  the  follow- 
ing calculation: 


96        WAR   AND   ARMAMENT   LOANS:   HISTORICAL   SURVEY 

TABLE  I. — WAR  AND  ARMAMENT  LOANS l 


Year8 

War  Loan   A'™ 

Total 

Total  of  Na- 
tional Loans 

1868     

Yen 

2A..O'\7  ^86 

Yen 

24  O^7,  ^86 

Yen 
24  0^7  ";86 

1  869  

5O,OQO,867 

50,090,867 

50,0:10,867 

1870.  . 

5S.SOO.OOO 

55,500,000 

60,380,000 

1871  

55.5OO.OOO 

55,500,000 

65,152,000 

1872.  .     

55.4QQ.QQ8 

55,4qq,998 

q6,456,oq6 

187-;.  .     

68,546,871 

68,546,871 

Iiq.  021,854 

1874.  . 

80,050.^2'; 

8Q.O5Qf^2^ 

138,821,637 

1875.  . 

01,275,860 

qi,275,86q 

154  882  061 

1876  

q-v  -12^  OI  I 

Q^.^2^,OII 

I5Q  O74,q26 

1877 

JO'*,  ^21.764 

10^  ^21.764 

^42  1^7  480 

1878.  . 

1^4,800,455 

1^4,800,455 

3qi,782,68o 

1870  

129,190,804 

I2q,iqo,8o4 

•^80,  507,  680 

1880  

12^,  412,  ^6Q 

12^,412,^60 

^74,278,716 

1881  

I2O,QO5,IQ4 

I2O,QO5,IQ4 

^65,  Ot2,  T\  5 

1882  

120,368  856 

120,368,856 

^4q  880,  2q8 

1883  

IO7,QQQ  277 

107  qqq.277 

325  662  1  66 

1884  

lO'l.^SO  2^2 

103  380  232 

•j-ji  71  5  14.7 

1885  

Q8  "J.45  OQ6 

q8  "^45  Oq6 

329  6oi  083 

1886  

76,^95  Q45    5  OOO.OOO 

8  1  W5  q45 

•3O7  7q5  iq6 

1887.  . 

63,565,988   II,OOO,OOO 

74,565.q88 

•zcn.7q6.276 

1888  

55,468,455  i  ^.ooo.ooo 

68,468,455 

2q6.qo6.^76 

1889  

50,065,256   I7,OOO,OOO 

67  065  256 

2q5  5IO  821 

1890  

41,370072   I7OOO,OOO 

58  ^7O  O72 

306  600  727 

1891  

^6,87^.78Q   l6  qqO  OOO 

5T  86-?  78q 

•JOG  6l7  4q8 

1892.  . 

29,200,044   16,980,000 

46.180.044 

286.t27.';i6 

:8q^  

25,704,77-*  16,070,000 

42  674.77^ 

28^  5iq.624 

iSOJ..  . 

73,621,747   l6,96o,OOO 

qo  581.747 

•?2q.'l27  8oi 

1895.  . 

165,623,236  16  950  ooo 

182  57^  2^6 

42O  ^^q  2^1 

1  896  

161,769082   15006000 

176  775  082 

4iq  ^80  217 

1897.  . 

I3I  567  374  26  048  636 

157  616  oio 

428  2AI  302 

1898  

129,948,015  51.  ^02,267 

l8l  250  282 

4l8  ^65.  ^8q 

I  8qq  .  . 

118,775,00^   6p  W*,Q22 

188  169  825 

508  366  702 

1900  

118  ^06,  ^^   78  084.  267 

197  290  600 

510  189  078 

IQOI  .  . 

133,672  866  82  848  270 

2l6  521  1^6 

57O  117  q56 

IQO2  .  . 

117,184397  84908800 

2O2  Oq^  iq7 

586  l64  258 

iqO^  .  . 

I2l,Qn,,QTlQ   qo,iqq,2OO 

212  Il^.I'iq 

582  084  no 

IQO4..  . 

572,606,170   90  882  400 

66^  488  57O 

I  085  qi6  757 

iqO5.  . 

I.487.8q4,O74   qo  605  65O 

I  578  4qq  724 

2  Oq^  58l  121 

1006.  . 

1,980,176,112   90605650 

2  070  781  762 

2  55O  671  41  5 

I  007.  . 

1.  741.810.  ^24   8q  485  40O 

I  8^1  2q5  724 

2  276  ^46  452 

IQO8.  . 

1,  678,667,  ^-U)   8q.485,4OO 

I  768  152  730 

2  255  8ll  qi7 

1909.  . 

1,580,448,010  85.08^  500 

I  666  4^1  51  o 

2  651  2^1  654 

IQIO.  . 

1,603,668,451   63  243  800 

I  666  912  251 

2  78O  ^8l  215 

IQII  .  . 

1,  514.  ^OQ,O47   6^  24^  8OO 

I  577  552  847 

2  74.2  I7q  qiq 

IQI2  .  . 

1.454  808.762   6^  24^  8OO 

I  51  8  IA2  562 

2  7A.1  ^7O  714. 

•  Up  to  1885,  the  figures  are  for  the  calendar  year  ending  with  the  date  given; 
from  1886  on,  the  fiscal  year  ending  with  the  date  given. 

1  The  war  loans  in  this  table  include  "Dajokwansatsu,"  "  Mimbushosatsu," 
New  Paper  Money  and  other  government  paper  money,  temporary  loan  for  the 


PRESENT   AMOUNT   OF   PUBLIC  LOANS 


97 


The  armament  loans  in  this  table  include  navy  loan,  the 
part  of  public  undertakings  loan  which  was  appropriated  to 
national  defense  expenditure,  temporary  loan  for  the  con- 
struction of  warships,  and  a  small  part  of  4  per  cent  domestic 
loan. 

TABLE  II. — WAR  AND  ARMAMENT  LOANS  1 


Fiscal  Year 

War  Loan 

Armament  Loan 

Total 

IQOI  

Yen 
116,581,450 

Yen 
78,073  600 

Yen 

IQA.  6^S  O^O 

1902  

IIS.64I.ISO 

84,908,800 

2OO  S4.0  QSO 

TOO"?  .  . 

212,618,500 

87.630.200 

•JOO  ^17  7OO 

IQO4.  .  . 

Q06.  44.2,  4.2  S 

88,382,400 

I  084  824  825 

IQOS  .  . 

1,349,284,950 

90,605,650 

1,439,890  6OO 

1906  

I.40Q,Q2O,779 

90,605,650 

I.SQO  S26  4.2Q 

TQO7     . 

I  ,27^,l86,t2^ 

80.  4.8s.  4.00 

1.^62  671  72^ 

1008  .  . 

1,176,210,848 

89,485,400 

1,265,696,248 

IQOO  .  . 

1,079,400,672 

85,983,500 

I,l6S.^84.  172 

1910  

02S.026,6lO 

S4.  Q4.7.IOO 

080  87^  7IQ 

IQII  .  . 

836,932,277 

54,947,IOO 

8oi,87Q.'*77 

IQI2     . 

807,001.277 

S4.047.IOO 

862  O^8  t77 

LOANS  FOR  THE  ENCOURAGEMENT  OF  INDUSTRIES 

The  amount  of  the  various  kinds  of  public  loans  is  shown  in 
the  annual  statistical  report  of  the  Finance  Department  with 
regard  to  national  loans.  A  further  special  investigation  was 
made  on  the  basis  of  this  authority,  which  is  shown  in  the 
table  on  the  next  page. 

suppression  of  rebellion,  temporary  loan  for  military  expenditure,  temporary 
loan  concerning  Chinese  affairs,  exchequer  bonds,  extraordinary  military  expendi- 
tures loan,  temporary  loan  for  extraordinary  military  expenditure,  temporary  loan 
for  the  redemption  of  military  bills,  exchequer  bonds  consolidation  loan,  6  per 
cent  sterling  loan,  4  per  cent  sterling  loan,  the  second  4  per  cent  sterling  loan,  5  per 
cent  sterling  loan,  a  part  of  4  per  cent  French  loan,  a  part  of  4  per  cent  domestic 
loan  (the  part  which  was  floated  for  the  conversion  of  military  loan)  and  relief  loan. 
1  Based  on  Financial  Department  Yearly  Statistical  Report  Concerning  National 
Loan,  and  the  classification  is  that  adopted  by  the  Financial  Department.  The 
table  does  not  include  various  temporary  loans  and  treasury  bills.  The  war 
loans  include  temporary  loan  for  the  suppression  of  the  rebellion,  war  loan,  ex- 
chequer bonds,  6  per  cent  sterling  loan,  4^  per  cent  sterling  loan  (excluding  those 
for  the  adjustment  of  finance),  extraordinary  military  expenditures  loan,  5  per 
cent  loan  (excluding  loans  for  the  encouragement  of  industries,  reform  of  institu- 
tions, adjustment  of  finance,  governance  of  new  territories),  and  5  per  cent  Class 
B.  They  do  not  include  second  4  per  cent  sterling  loan,  5  per  cent  sterling  loan, 
4  per  cent  domestic  loan  (a  part),  4  per  cent  French  loan  (a  part),  and  temporary 
loan  for  the  redemption  of  military  bills.  The  armament  loans  do  not  include  the 
fund  for  the  conversion  of  navy  loan. 

8 


WAR   AND   ARMAMENT   LOANS  I   HISTORICAL   SURVEY 


TABLE  SHOWING  THE  FIGURES  OF  RAILWAY  LOAN  AND  OTHER  PUBLIC  UNDER- 
TAKINGS  LOANS1 


Year" 

Railway  Loan 

Other  Public 
Undertakings 
Loans 

Total 

1870       

Yen 
4,880,000 

Yen 

Yen 
4,880,000 

1871     

4,880,000 

4  880  ooo 

1872    

4,880,000 

4  880  ooo 

1871 

4.  102  ,000 

4,392  ooo 

1874. 

1.QO4.OOO 

3  904  ooo 

1875 

3  416,000 

3  416  ooo 

1876..         

2,928,OOO 

2,928,000 

1877.  .     

2,44O,OOO 

2,440.000 

1878  

I.Q52,OOO 

12,500,000 

14.452  ooo 

1870.  . 

1,464,000 

12,500,000 

13,964  ooo 

1880  

076,000 

12.214  O5O 

13  2IO  050 

1881  

.  488,000 

1  1,040  65O 

12  417  65O 

1882  

1  1  649  050 

1  1  64Q  O5O 

1883  

II  -J2I  Q5O 

II  121  Q5O 

1884   

15,000,000 

10  996  250 

25  OQ6  25O 

1885        

20,000  ooo 

IO  76o  15O 

10  760  1^0 

1886  :  

20,000,000 

10,740,150 

IO  74O  15O 

1887.  . 

20,000,000 

IO  71O.15O 

IO  71O  15O 

1888  

19,000,000 

IO  7IO  2OO 

30  7OO  2OO 

1889  

21,990,000 

IO  7IO  2OO 

32  7OO  2OO 

1890  

21,980  ooo 

IO  7OO  2OO 

32  68O  2OO 

1891  

15,922,000 

10  680,200 

26  603  100 

1892.  . 

2,000,000 

2  OOO  OOO 

189-;.  . 

4,000,000 

4  ooo  ooo 

1804..  . 

4,000  ooo 

4  ooo  ooo 

1895.  . 

6  ooo  ooo 

6  ooo  ooo 

1896    

IO  OOO  OOO 

3  ooo  ooo 

13  ooo  ooo 

1897.  . 

18,807,150 

21  217  064 

4O  O45  114 

1898.  .           .... 

18.007,150 

1  8  QO7  15O 

1800  .  . 

17.462  650 

58  582  O22 

96  044  672 

igOO  

17.462  650 

52  4O1  6ll 

80  0^6  28l 

I9OI  

75  632  200 

27  058  ooo 

I  O2  690  2OO 

IQO2  .  . 

81,667,050 

IO  076  I  5O 

112  643  2OO 

IQOI  .  . 

82.775,650 

31  868  950 

114  644  6OO 

I  QO4.  . 

85  ^44  QSO 

11  041  O5O 

117  288  ooo 

TQO5  .  . 

8*1  748  500 

11  OQO  55O 

1  16  8lQ  O^O 

1906  

100,50^,700 

11  OQO  5  5O 

111  5Q4  25O 

IQO7  .  . 

148,480.7^0 

l8  4IQ  55O 

1  86  909  280 

IQO8.  . 

185,2-16  710 

l8  4IQ  55O 

223  656  28o 

I  QOQ  .  . 

579  871  O5O 

17  Q10  45O 

617  810  500 

IQIO.  . 

525  ^52  25O 

IQ  4Q4  6^O 

5AA  8^6  OOO 

IQII  .  . 

5IO,28o,55O 

10  4Q4  65O 

5  18  784  2OO 

IQI2  .  . 

5IO,I7^.OOO 

2O  412  2OO 

51Q  586  2OO 

a  Up  to  1885,  the  figures  are  for  the  calendar  year  ending  with  the  date  given; 
from  1886  on,  the  fiscal  year  ending  with  the  date  given. 

1  Prior  to  1900,  there  was  no  yearly  Statistical  Report  concerning  national  loans. 
Therefore,  the  foreign  9  per  cent  loan,  Nakasendo  railway  loan,  railway  replenish- 
ment loan,  railway  loan,  undertakings  loan  (excluding  national  defense  loan),  and 
Hokkaido  railway  loan  have  been  taken  into  account.  After  1901  the  figures  are 


PRESENT  AMOUNT   OF   PUBLIC   LOANS  99 

Besides  the  war  and  armament  loans  and  loans  for  the 
encouragement  of  industries,  there  are  loans  for  the  reform  of 
institutions,  the  loans  for  the  readjustment  of  finance,  and 
colonial  loans.  Of  all,  loans  connected  with  military  affairs 
constitute  the  overwhelming  majority,  while  productive  loans 
are  insignificant.  At  the  end  of  the  fiscal  year  1913  the  major- 
ity of  the  total  sum  of  public  loans  are  military  loans,  and  the 
remaining  minority  is  divided  about  equally  into  productive 
public  loans  and  administrative  and  financial  loans. 

based  on  Annual  Statistical  Report,  etc.  Other  undertakings  loans  include  loans 
for  harbor  construction,  drainage,  road  construction,  mining,  steel  foundry,  exten- 
sion of  telephone  and  prohibition  of  seal  shooting.  As  a  part  of  the  4  per  cent 
domestic  loan,  and  the  floating  loans  were  not  taken  into  account,  the  figures  do 
not  coincide  with  those  in  a  table  inserted  elsewhere. 


CHAPTER  VII 
CONCLUSION 

We  sum  up  below  what  has  been  said  about  the  history  of 
war  and  armament  loans  and  about  the  fluctuations  of  the  total 
amount  of  national  debts.  The  war  and  armament  public 
loans  commenced  with  government  paper  moneys  such  as 
"  Dajokwansatsu, "  "  Mimbushosatsu, "  New  Paper  Money, 
etc.,  all  of  which  was  issued  in  connection  with  the  Restora- 
tion. When  in  1877  there  was  an  increased  issue 'of  paper 
money  and  temporary  loans  for  the  suppression  of  the  Sat- 
suma  Rebellion,  the  total  sum  of  the  national  debts  suddenly 
rose  to  342,000,000  yen  in  1877,  and  391,000,000  yen  in  1878. 
Though  there  was  a  navy  loan  in  1886,  the  total  sum  of  na- 
tional debts  did  not  increase,  but  it  gradually  decreased  till 
1894.  Owing  to  a  great  sum  of  war  loans  and  temporary  loans 
in  connection  with  the  Sino-Japanese  War,  the  total  sum  at 
the  end  of  the  fiscal  year  1895  was  above  420,000,000  yen. 
After  the  war  there  was  an  increase  of  railway  loans  and  loans 
for  other  kinds  of  undertakings,  and  though  the  armament  ex- 
penditure was  disbursed  out  of  the  indemnity  fund,  the  deficit 
was  covered  by  undertakings  loans.  Thus,  at  the  end  of  the 
fiscal  year  1899,  the  total  sum  of  public  loans  was  a  little  above 
508,000,000  yen.  In  1900  the  Boxer  Uprisings  occurred  in 
North  China,  which  gave  rise  to  the  North  China  Affair  Tem- 
porary Loans,  and  there  was  also  an  increased  issue  of  under- 
takings loans.  And  yet  the  total  sum  of  national  loans  at  the 
end  of  the  fiscal  year  1902  still  remained  little  above  586,000,- 
ooo  yen.  When  in  1904  war  broke  out  between  Japan  and 
Russia,  the  total  sum  suddenly  rose  to  1 ,085,000,000  yen,  which 
was  wholly  due  to  the  sudden  issue  of  exchequer  bonds,  tem- 
porary loans  for  the  construction  of  warships,  the  extraordi- 
nary military  expenditures  loan,  the  6  per  cent  sterling  loan, 
etc.  In  the  fiscal  year  1905  there  was  an  increase  of  exche- 
quer bonds,  of  temporary  loans,  and  4.5  per  cent  sterling  public 


CONCLUSION  101 

loan,  and  a  second  4  per  cent  sterling  loan  was  issued,  thus  rais- 
ing the  total  to  2,000,000,000  yen.  In  the  following  fiscal  year, 
1906,  besides  the  continued  flotation  of  the  second  4  per  cent 
sterling  loan,  there  were  issues  of  the  extraordinary  military 
expenditures  loan,  and  the  5  per  cent  sterling  loan,  the 
total  sum  showing  2,550,000,000  yen.  After  this  year,  though 
there  were  issues  of  public  loans  for  buying  up  railways  and 
other  auxiliary  readjustment  loans,  the  total  sum  of  national 
debts  decreased.  After  the  fiscal  year  of  1909,  owing  to  the 
readjustment  by  conversion  into  lower  interest  loans,  the  total 
sum  increased.  The  conversion  was  affected  by  an  Imperial 
4  per  cent  loan,  the  third  4  per  cent  sterling  loan,  and  the  4  per 
cent  French  loan.  It  is  true  that  these  were  not  used  for  the 
sole  purpose  of  converting  war  and  armament  loans,  but  at 
least  one-half  of  these  loans  converted  military  loans,  navy 
loans,  the  remainder  of  exchequer  bonds,  and  extraordinary 
military  expenditures  loans.  Consequently  the  total  amount 
of  public  debts  at  the  end  of  the  fiscal  year  1909  was  a  little 
above  2,650,000,000  yen,  and  in  the  fiscal  year  1910  it  stood  at 
2,780,000,000  yen.  Though  there  was  a  slight  falling  off  after 
this  year,  still  in  the  fiscal  year  1912  the  sum  total  showed 
2,743,000,000  yen.  Of  this  sum,  what  can  be  regarded  as  war 
and  armament  loans  amount  to  about  1,518,000,000  yen,  i.e., 
55  per  cent  of  the  total  amount. 

The  total  amount  of  national  loans  may  be  divided  into  two 
kinds:  (i)  unfunded  loans  and  (2)  ordinary  loans. 

Roughly  speaking,  unfunded  loans  showed  the  biggest  fig- 
ures during  a  period  of  ten  years  before  and  after  the  Satsuma 
Rebellion,  during  a  period  of  three  years  before  and  after  the 
Sino-Japanese  War,  during  the  period  of  three  years  following 
the  Russo-Japanese  War,  and  during  the  three  years  following 
the  conversion  of  1910.  The  increased  issue  of  paper  moneys 
and  convertible  bank  notes  gave  rise  to  the  expansion  of  cur- 
rency. 

Ordinary  loans  may  be  divided  into  domestic  and  foreign 
loans.  In  1872  foreign  loans  equalled  488,000,000  yen  against 
domestic  loans  amounting  to  23,000,000  yen.  In  1877  foreign 
loans  showed  13,000,000  yen  against  domestic  loans  amount- 


UNIVERSITY  OF  CALIFORNIA 
SANTA  BARBARA  COLLEGE  LIBRARY 


102      WAR   AND   ARMAMENT   LOANS:   HISTORICAL    SURVEY 

ing  to  210,000,000  yen.  In  1887  foreign  loans  fell  off  to 
6,900,000  yen  against  domestic  loans  amounting  to  230,000,000 
yen.  In  1897  there  was  no  foreign  loan,  whereas  there  were 
domestic  loans  amounting  to  399,000,000  yen.  After  this  date 
there  was  only  a  small  sum  of  foreign  loans.  In  1902  the 
foreign  loans  amounted  only  to  97,000,000  yen  against  do- 
mestic loans  amounting  to  432,000,000  yen. 

The  Russo-Japanese  War  brought  about  a  great  increase  in 
foreign  loans.  In  1907  foreign  loans  amounted  to  1,165,000,- 
ooo  yen  against  domestic  loans  amounting  to  1,088,000,000 
yen.  After  this  year,  foreign  loans  showed  even  bigger  figures 
than  domestic  loans.  At  the  end  of  the  fiscal  year  1912  the 
domestic  loan  fell  off  to  1,066,000,000  yen,  while  the  foreign 
loan  increased  to  1,427,000,000  yen.  Domestic  loans  had  gen- 
erally the  tendency  of  making  the  money  market  tight,  while 
on  the  contrary,  foreign  loans  made  the  money  market  slack  in 
the  first  place,  and  then  brought  about  the  rise  of  prices  and 
interest. 

The  greater  part  of  the  foreign  loans  consisted  of  war  and 
armament  loans.  Of  1,427,000,000  yen,  which  was  the  total 
sum  at  the  end  of  the  fiscal  year  1912,  nearly  1,153,000,000  yen 
belongs  to  war  and  armament  loans  or  their  conversion  loans, 
the  remaining  sum  being  composed  of  the  greater  part  of  the 
first  4  per  cent  sterling  loan,  the  third  4  per  cent  sterling  loan, 
the  greater  part  of  the  4  per  cent  French  loan,  and  the  loans 
for  nationalization  of  railways.  If  we  add  to  this  sum  more 
than  one-half  of  the  domestic  loans,  such  as  extraordinary 
military  expenditures  loans,  the  relief  loan,  and  the  domestic  4 
per  cent  loan,  we  get  the  total  sum  of  war  and  armament  loans 
amounting  to  1,518,000,000  yen,  which  is  55  per  cent  of  the 
total  sum  of  our  national  debts. 

It  is  significant  that  the  total  sum  for  the  encouragement  of 
industries  amounts  to  796,000,000  yen,  only  29  per  cent  of  the 
total  sum  of  our  national  debts. 

Further,  we  shall  consider  the  redemption  expenditure  (in- 
terest and  sinking  fund).  The  total  sum  of  interest  payable  in 
the  fiscal  year  1912  was  114,000,000  yen,  of  which  interest  on 
domestic  loans  was  52,000,000  yen,  while  interest  on  foreign 


CONCLUSION  IO3 

loans  showed  the  big  sum  of  62,000,000  yen.  In  the  same  fis- 
cal year  the  principal  annually  to  be  redeemed  was  68,000,000 
yen,  of  which  the  redemption  of  domestic  loans  was  51,000,000 
yen,  while  that  of  foreign  loans  was  9,760,000  yen. 

It  is  impossible  to  know  the  exact  figures  of  the  sinking  fund 
and  interest  of  the  war  and  armament  loans  in  the  above  fiscal 
year.  But  the  amount  of  war  and  armament  loans  figured 
1,518,000,000  yen.  If  we  fix  the  average  rate  of  interest  at 
4.25  per  cent  per  annum,  the  interest  would  be  64,000,000  yen. 
If  we  add  to  this  amount  about  10,000,000  yen,  which  is  in- 
ferred to  be  the  annual  amount  of  the  principal  redeemed,  the 
total  would  be  74,000,000  yen.  The  estimate  generally  ac- 
cepted with  regard  to  the  military  burdens  of  our  people  must 
be  subjected  to  some  modifications.  Generally  the  military 
burden  of  our  nation  is  calculated  to  be  about  33  per  cent  of 
the  total  outlay.  This  calculation  is  made  by  taking  into  con- 
sideration only  the  ordinary  and  extraordinary  expenses  of  the 
military  and  naval  department  of  the  annual  account,  and 
excluding  what  ought  to  be  .taken  into  account.  The  general 
account  in  the  fiscal  year  1912  shows  the  following  figures: 

Yen  Yen 

Army  expenditure 95.956,98o 

Navy  expenditure 93,810,305 

189,767,285 

Pension  to  military  men  and  their  families 14,139,546 

Pension  to  naval  men  and  their  families 2,628,447 

Relief  and  aid  to  military  and  naval  men 123,023 

The  Order  of  the  Golden  Kite  pension 8,570,400 

—      25,461,416 

Interest  on  war  and  armament  loan 64,000,000 

Redemption  of  war  and  armament  loan 10,000,000 

74,000,000 


Total 289,228,701 


These  expenditures  amount  to  nearly  50  per  cent  of  the  total 
expenditures  for  that  fiscal  year,  and  constitute  the  true  mili- 
tary burden  of  our  nation,  amounting  to  57  yen  per  head.  We 
have  excluded  from  the  above  table  expenditures  with  regard 
to  the  establishment  and  expansion  of  iron  foundries,  and  of 
military  and  naval  arsenals.  In  view  of  these  figures,  the  mil- 
itary burden  on  the  shoulders  of  our  nation  is  anything  but 
light. 


PART  II 

ECONOMIC   EFFECTS  OF  PUBLIC 

LOANS   FOR  WAR  AND 

ARMAMENT 


CHAPTER  I 
INTRODUCTION 

By  the  economic  effects  of  war  and  armament  loans  is 
meant  the  effects  and  influences  due  to  the  issue  and  redemp- 
tion of  war  'and  armament  loans.  The  economic  effects 
brought  about  by  the  outlay  of  the  funds  obtained  by  these 
loans  must  be  excluded  inasmuch  as  they  overlap  the  effects  of 
the  war  and  armament  expenditures.  The  effects  due  to  the 
issue  and  redemption  of  public  loans  are  both  direct  or  indi- 
rect. The  indirect  effects  and  influences  sometimes  have  a 
great  deal  to  do  with  the  economic  effects  due  to  expenditures 
and  to  taxation.  The  present  discussion,  however,  is  con- 
fined to  the  direct  and  special  indirect  effects  due  to  the  issue 
and  redemption  of  the  loans. 

The  economic  effects  of  war  and  armament  loans  include: 

(1)  Effects  on  finance, 

(2)  Effects  on  the  money  market, 

(3)  Effects  of  industries, 

(4)  Effects  on  society  at  large. 


107 


CHAPTER   II 
EFFECTS  ON  PUBLIC  FINANCE 

The  financial  effects  of  the  issue  and  redemption  of  war  and 
armament  loans  must  be  divided  into  effects  upon  state 
finance,  and  effects  upon  local  finance.  The  former  are  the 
more  conspicuous  of  the  two.  Moreover,  they  are,  for  the 
most  part,  direct  effects,  while  the  latter  are  chiefly  indirect 
influences. 

EFFECTS  UPON  STATE  FINANCE 

The  effects  upon  the  state  finance  of  the  issue  and  redemp- 
tion of  war  and  armament  loans  fall  into  four  heads: 

(1)  The  necessity  of  paper  money  adjustment  which  was 
brought  about  by  the  increased  issue,  and  the  consequent 
depreciation  of  various  kinds  of  government  paper  money 
issued  after  the  Restoration. 

(2)  The  necessity  of  national  loans  consolidation  occasioned 
by  the  increase  of  public  borrowing. 

(3)  The  increase  of  public  loans  charges  which  involves  the 
interests  and  sinking  funds. 

(4)  The  increased  issue  of  Treasury  bills  which  attended 
the  subscription  and  redemption  of  public  loans. 

These  are  the  most  important  of  the  effects  upon  state 
finance. 

Depreciation  and  Adjustment  of  Paper  Money 

The  kinds  of  government  paper  money  issued  in  connection 
with  the  Restoration  and  Satsuma  Rebellion  have  already 
been  described.  The  following  table  shows  the  total  amount 
of  those  issues. 


108 


EFFECTS    ON    PUBLIC   FINANCE 
TOTAL  ISSUE  OF  PAPER  MONEY 


IO9 


Kinds 

Amount 

Period  of 

Issue 

Dajokwansatsu  

48,000,000  Ryo 
7,500,000     " 

6,800,000  Yen 
2,500,000    " 
119,800,475     " 
19,618,116     ' 

May, 
September, 

October, 
January, 
April, 
June, 

1868,  to 
1869,   " 

1871,  " 
1872,  " 

December,  1869 
ii             u 

1871 
March,       1872 
end  of        1878 

Mimbushosatsu  

Exchequer        Exchange 
Notes  

Colonial  Exchange  Notes 
New  Paper  Money  

Reserve  Paper  Money.  . 
Total 

204,218,591  Yen 

Of  the  above,  the  new  paper  money  was  issued  in  order  that 
the  preceding  four  kinds  of  paper  money  might  be  superseded. 
The  reserve  paper  money  was  issued  as  a  substitute  for  the 
worn-out  or  injured  new  paper  money.  These  kinds  of  paper 
money  were  by  no  means  issued  on  a  single  occasion,  but  were 
issued  several  times  during  the  above-mentioned  periods. 
The  amount  of  circulation  of  these  kinds  of  government  paper 
moneys  outstanding  at  each  year's  end  is  estimated  as  follows : 

PAPER  MONEY  IN  CIRCULATION1 


Year 

Government  Paper 
Money 

Reserve  Paper 
Money 

Total 

1868  

Yen 
24,o/;7,';89 

Yen 

Yen 
24,037,389 

i  869  .  . 

SO  OQO.867 

50,090,867 

1870.  . 

5S.SOO.OOO 

55.  500,000 

1871  .  . 

60,272,000 

60,272,000 

1872  

64,800,000 

3,600,000 

68,400,000 

l87V  . 

77,281,014 

1,100,000 

78,381,014 

1874  

90,802,304 

1,100,000 

91,902,304 

1875  

91,283,869 

7,788,000 

99,071,869 

1876.  . 

Q^.^2^,1  S6 

11,824,426 

105,147,582 

1877  

93,835,764 

11,961.327 

105,797,091 

1878  

II9,8oo,47S 

19,618,116 

139,418,591 

1879.  . 

1  1*1,  IQO.SOJ. 

16,118,116 

130,308,920 

1880  

108,412,369 

16,528,116 

124,940,485 

1881  

IOS.9OS.IQ4 

13,000,000 

118,905,194 

1882  

IO5,^6Q,OI4. 

4,000,000 

109,369,014 

1  (i)  Reserve  paper  money  was  issued  for  the  first  time  in  June,  1872,  and  was- 
withdrawn  in  January,  1883.  (2)  "As  there  was  a  revision  of  the  calendar  in 
December,  1872,  the  figures  at  the  end  of  1872  are  those  of  November  30,  1872. 


IIO       WAR   AND   ARMAMENT   LOANS:    ECONOMIC   EFFECTS 

These  paper  moneys  were  all  inconvertible  in  fact.  It  was 
quite  natural,  therefore,  that  such  a  sudden  inflation  should 
have  led  to  a  decrease  of  the  prices  of  public  bonds  in  general, 
to  say  nothing  of  the  paper  moneys  themselves.  The  govern- 
ment, therefore,  was  obliged  to  undertake  readjustment  and 
redemption. 

Thereupon,  the  government  set  about  the  task  of  readjust- 
ment. The  first  step  was  taken  by  the  promulgation  of  the 
National  Bank  Regulation  of  November,  1872,  and  the  Kin- 
satsu  Exchange  Loan  Bond  Regulation  of  March,  1873.  Ac- 
cording to  these  regulations,  six-tenths  of  the  capital  of  the 
national  banks  was  to  be  deposited  with  the  Finance  Depart- 
ment in  government  paper  money,  in  exchange  for  which  6 
per  cent  "Kinsatsu"  exchange  loan  bonds  were  to  be  granted 
by  the  said  department. 

Further,  on  the  security  of  these  public  bonds,  bank  notes  of 
the  same  amount  were  to  be  delivered  from  the  Finance 
Department  to  the  national  banks  to  be  put  into  circulation. 
Four-tenths  of  the  capital  was  to  be  accumulated  in  standard 
coins,  viz.,  silver  coins,  as  an  exchange  reserve  for  bank  notes. 
Thus,  inconvertible  paper  money  that  had  been  issued  by  the 
government  was  to  be  replaced  by  convertible  bank  notes 
issued  by  the  national  banks. 

Owing  to  the  frequent  riots,  armament  expansions  and  the 
Satsuma  Rebellion,  all  of  which  occurred  during  the  period 
extending  from  1873  to  1878,  the  issue  of  government  paper 
money  suddenly  increased  and  finally  exceeded  the  demand. 
In  consequence,  the  balance  of  foreign  trade  continued  un- 
favorable, and  money  steadily  flowed  out.  Government 
paper  money  alone  was  in  circulation  in  the  domestic  money 
market,  and  the  national  banks  were  unable  to  issue  bank 
notes  and  experienced  no  small  difficulties  in  carrying  on  their 
business.  An  amendment  was  therefore  made  to  the  National 
Bank  Regulation  in  August,  1876,  to  the  effect  that  eight- 
tenths  of  the  capital  should  be  deposited  with  the  finance  de- 
partment in  public  bonds,  bearing  more  than  4  per  cent 
interest,  and  bank  notes  of  the  same  amount  were  authorized 


EFFECTS   ON    PUBLIC   FINANCE 


III 


to  be  issued.     Two  tenths  of  the  capital  was  to  be  accumu- 
lated in  currency1  as  an  exchange  reserve. 

Thus,  this  revision  abolished  the  method  adopted  by  the 
National  Banks  Regulation  of  1872,  concerning  the  adjust- 
ment of  government  paper  money,  and  made  the  bank  notes 
convertible  into  government  paper  money  instead  of  into 
standard  coins.  To  all  intents  and  purposes,  therefore,  the 
revision  consisted  in  establishing  a  system  of  increased  issue  of 
inconvertible  paper  money.  As  a  result,  national  banks 
sprang  into  existence  in  rapid  succession  both  in  city  and 
country  alike,  and  the  issue  of  bank  notes  knew  no  limit.  The 
government,  therefore,  restricted  the  total  amount  of  bank 
notes  issue  to  about  34,000,000  yen,  and  expressly  provided 
that  the  government  should  have  the  power  of  restricting  the 
amount  of  capital  of  national  banks  at  their  organization  and 
of  limiting  their  issues  of  paper  money. 

At  the  end  of  1879,  however,  the  national  banks  which  had 
been  organized  with  the  sanction  of  the  government  numbered 
153  and  the  amount  of  bank  notes  issue  rose  to  more  than 
34,000,000  yen. 

PAPER  MONEY  AND  BANK  NOTES  ISSUED* 


Calendar  Year 

Government  Paper 
Money  Issued 

Bank  Notes 
Issued 

Total 

1868  

Yen 

24.  0^7,  180 

Yen 

Yen 
24,017,189 

1860.  . 

26.OS1.477 

26,053,477 

1870.  . 

5,  4.OQtI  12 

5,409,132 

1871  .  . 

4.  772  OOO 

4,772,000 

1872  

4..  528.OOO 

4,528,000 

l8?v  . 

I'J.VM.&SQ 

1,362,210 

14,696,069 

1874.  . 

14  633  228 

612.7QO 

15,266,018 

1875  

2,441,206 

2,443,296 

1876.  . 

SOQ.s6l 

124.000 

811,561 

1877.  . 

Sii  0-24. 

11,608,751 

12,122,685 

1878.  . 

27,000,000 

12,926,255 

39,926,255 

1870.  . 

1.  717 

7.767,008 

7,768,725 

1  880  

^80,  117 

l8O,H7 

1881  

1882  

Total  

121.  21S  SQ7 

m  001,^51 

IS8.2l6.Q48 

1  Includes  government  paper  money. 

1  Based  upon  A  Summary  of  the  Circumstances  Attending  the  Reform  of  the  Mone- 
tary System,  1897. 


112       WAR   AND   ARMAMENT   LOANS:   ECONOMIC   EFFECTS 


Calendar 
Year 

Amount  of 
Circulation  of 
Government 
Paper  Money 

Amount  of 
Circulation  of 
Bank  Notes 

Total 

Amount  of 
Specie 
Reserve 

Price  of 
Paper  Cur- 
rency per 
One  Yen 
in  Silver 

1868    

Yen 

24..  O17,  ^89 

Yen 

Yen 
24,O17.l89 

Yen 

Yen 

O   74.8 

1869    

so,  000,867 

50  090  867 

19  6ll 

o  962 

1870.  . 

55,5OO,OOO 

55,5OO,OOO 

•19,87'; 

I  .OH 

1871  

60,272,000 

60,272,000 

191,287 

O.978 

1872.    . 

68,400,000 

68,400,000 

14,709,800 

O.OlS 

l8?V    . 

88,281,014 

1,362,210 

89,641,224 

H,  8lQ,I27 

I  .016 

l87A.    . 

101,802,304 

I.995.OOO 

IO1,797,1O4 

18,483,983 

I  .Ol6 

1875  

99,071,869 

1,420,000 

101,491,869 

14,664,027 

I  .029 

1876.  . 

105,147,582 

i  ,744,000 

106,891,582 

15,171,224 

0.989 

1877.  . 

105,797,092 

13,352,751 

119,149,843 

15,115,405 

I  .033 

1878.  . 

119.418,592 

26,279,006 

165,697,598 

17,817,729 

I  .OQQ 

1870.  . 

110,108,921 

34,046,014 

164,154,915 

9,967,879 

I  .212 

1880  

1  24,  Q4O,  4.8s 

34,426,151 

159,166,816 

7,166,819 

I  .477 

1881.  ...... 

118,905,194 

34,396,818 

153,302,012 

12,699,576 

1  .696 

1882    

109.169,014. 

14,185,14.9 

14."*.  754.,  l6l 

16,710,267 

I  .  571 

Thus  to  the  already  excessive  inflation  of  government 
paper  money  was  further  added  the  increased  issue  of  bank 
notes.  It  was,  therefore,  only  natural  that  an  agio  sprang  up 
between  metallic  and  paper  currency.  The  preceding  tables 
show  the  issue  amount  of  government  and  bank  paper  money, 
their  amount  of  circulation,  the  amount  of  specie  reserve, 
together  with  the  monthly  average  price  of  paper  currency 
against  metal  (silver). 

Thus  the  specie  reserve  was  merely  nominal,  inasmuch  as 
both  government  and  bank  paper  money  were  virtually  in- 
convertible. The  amount  of  paper  money  went  on  increasing 
year  after  year,  until  at  last  its  price  suffered  a  great  slump,  as 
is  shown  in  the  preceding  table.  The  government  realized 
the  necessity  of  readjusting  the  public  loans  and  paper  money 
as  early  as  1878,  and  drew  up  rough  estimates  concerning  the 
redemption  of  public  loans  and  paper  money. 

1  Based  upon  A  Summary  of  the  Circumstances  Attending  the  Monetary  System 
Reform,  1897.  The  amount  of  circulation  is  the  amount  of  issue  minus  the  re- 
deemed sum.  The  amount  of  specie  is  the  amount  of  issue  minus  the  amount 
melted  down  and  minus  the  net  sum  of  exportation. 


EFFECTS   ON    PUBLIC   FINANCE  113 

A  program  was  then  established  to  accomplish  the  redemp- 
tion work  in  twenty-eight  years'  time,  extending  from  the  fis- 
cal year  1878  to  the  fiscal  year  1905. 

Upon  this  basis  the  estimated  amount  of  paper  money  to  be 
withdrawn  in  the  financial  year  1878  was  raised  from  500,000 
yen  to  about  7,160,000  yen.  This  enormous  increase  is  in 
part  ascribable  to  the  fact  that  1,460,000  yen  was  subtracted 
from  the  estimated  sum  for  the  redemption  of  principal  and 
interest  of  public  loans  for  that  fiscal  year  to  be  added  to  the 
paper  money  redemption.  Furthermore,  the  surplus  result- 
ing from  settlement  of  annual  revenue  for  the  fiscal  years  1876 
and  1877,  amounting  to  3,370,000  yen,  and  the  surplus  result- 
ing from  the  settlement  of  expenditures  with  regard  to  the 
Satsuma  Rebellion,  amounting  to  440,000  yen,  and  other  dis- 
bursements out  of  the  reserve  fund  of  the  national  Treasury, 
amounting  to  over  1,380,000  yen,  were  all  appropriated  to 
paper  money  redemption. 

In  consequence,  from  1879  silver  coin  rose  steadily  against 
paper  money.  Then  the  government  founded  in  Yokohama 
the  Foreign  Silver  Exchange  and  the  Yokohama  Specie  Bank, 
and  charged  them  with  the  sale  of  silver  coins.  Besides  this, 
the  government  sold  out  silver  coins  from  the  Treasury  to  the 
market  through  the  First  and  Second  National  Banks  and  the 
Mitsui  Bank.  The  object  of  these  expedients  was  to  put  a 
check  on  the  appreciation  of  silver  coins.  Realizing,  however, 
the  fruitlessness  of  petty  manipulations,  the  government  at 
last  decided  to  readjust  it  through  a  direct  measure.  By 
Notification  No.  40  of  the  Dajokwan,  September,  1880,  the 
Sake  Manufacture  Tax  Law  was  revised,  and  the  increased 
receipt  thus  obtained  was  appropriated  to  the  redemption  of 
paper  money.  By  Notification  No.  48  of  Dajokwan,  Novem- 
ber, 1880,  the  rate  of  the  land  surtax  (one  of  the  items  of  local 
taxation)  was  raised  and  at  the  same  time  added  to  the  items 
of  expenditure  from  local  taxation,  thus  decreasing  the  local 
expenditures  to  be  defrayed  out  of  the  national  Treasury. 
The  government  also  instructed  the  departments  to  curtail 
their  expenditures  and,  by  the  regulation  concerning  the  trans- 


114       WAR   AND   ARMAMENT   LOANS:    ECONOMIC   EFFECTS 

fer  of  state  factories  to  private  undertakings,  charged  the 
departments  to  transfer  to  private  individuals  all  the  govern- 
ment factories  hitherto  carried  on  by  the  government.  At 
the  same  time  the  loaning  business  out  of  the  reserve  fund  of 
the  Treasury  was  abolished.  Thus  funds  obtained  by  these 
curtailments  and  adjustments  were  all  directed  to  the  redemp- 
tion of  paper  money. 

In  spite  of  all  these  government  measures  the  price  of  paper 
currency  went  on  decreasing,  reaching  its  extremity  in  April, 
1 88 1,  when  the  ratio  between  silver  and  paper  currency  was 
one  yen  to  1.815  yen.  Moreover,  there  was  an  upheaval  of 
prices  and  an  advance  of  money  interest  which  resulted  in  the 
repression  of  enterprises.  A  heated  public  discussion  as  to  its 
relief  was  then  carried  on.  The  government  decided  in  Octo- 
ber, 1 88 1,  on  the  adoption  of  a  fundamental  policy  in  connec- 
tion with  the  redemption  and  readjustment  of  paper  money. 
For  this  purpose  resort  was  had  to  about  7,000,000  yen  out  of 
the  ordinary  revenue,  and  to  above  38,438,000  yen  out  of  the 
reserve  fund,  representing  the  balance  after  deducting  various 
advances,  amounting  to  19,355,000  yen,  out  of  the  reserve 
fund  amounting  to  55,793,ooo  yen.  These  two  funds  were  at 
once  appropriated  to  the  redemption  of  paper  money  on  the 
one  hand,  and  the  accumulation  of  specie  on  the  other,  in  order 
that  the  recovery  of  the  price  of  paper  money  and  the  replen- 
ishment of  specie  reserve  might  be  duly  accomplished.  The 
establishment  of  the  central  bank  was  also  decided  upon,  with 
the  object  of  carrying  out  the  exchange  of  paper  money. 
Thus  by  Dajokwan  Notification  No.  32  in  June,  1882,  the 
Bank  of  Japan  Regulation  was  enacted  and  its  business  was 
opened  on  October  10,  1882.  Though  the  Bank  of  Japan  was 
expressly  authorized  by  Article  13  of  the  said  regulation  to 
issue  the  convertible  bank  notes,  the  government  hesitated 
to  allow  the  bank  immediately  to  exercise  the  authority,  as 
there  still  existed  no  small  agio  between  silver  and  paper 
currency. 

The  above  relates  to  the  readjustment  of  the  government 
paper  money.  There  were  also  in  circulation  the  bank  notes 


EFFECTS   ON    PUBLIC   FINANCE  115 

issued  by  the  national  bank  on  the  exchange  reserve  of  govern- 
ment paper  money,  which  also  needed  readjustment. 

According  to  the  National  Bank  Regulation  of  1872  the 
bank  notes  were  to  be  converted  into  metallic  currency,  but  by 
the  amendment  of  1876,  they  were  made  exchangeable  into 
inconvertible  paper  money.  Their  readjustment,  therefore, 
had  to  be  carefully  attended  to.  Consequently,  an  important 
amendment  was  made  to  the  National  Bank  Regulation  by 
Dajokwan  Notification  No.  14,  May,  1883,  the  most  remark- 
able feature  of  which  was  as  follows: 

Any  national  bank  might  continue  its  business  for  twenty 
years  after  the  date  on  which  it  received  its  charter.  Even 
after  the  expiration  of  the  term  it  might  continue  its  business 
as  a  private  bank,  but  should  not  retain  the  privilege  of  issu- 
ing paper  money  (Art.  12).  National  banks  were  required  to 
deposit  with  the  Bank  of  Japan  the  sum  of  money  correspond- 
ing to  one- fourth  of  the  paper  money  granted,  and  the  reserve 
fund  out  of  the  half-yearly  profits  corresponding  to  1.25  per 
cent  of  the  amount  of  paper  granted  (Art.  20) .  The  Bank  of 
Japan  should,  on  request,  exchange  bank  paper  money  issued 
by  the  national  banks  (Art.  49).  All  the  paper  money  is- 
sued by  the  national  banks  was  to  be  withdrawn  while  they 
existed  as  the  national  banks  according  to  such  method  as  the 
government  thought  fit.  But  the  procedure  of  the  manage- 
ment was  to  be  decided  by  the  finance  minister,  and  subse- 
quently to  be  attended  to  by  the  Bank  of  Japan  (Art.  212). 
Besides  the  bank  notes  redeemed  by  the  Bank  of  Japan  ac- 
cording to  the  above  method,  there  were  also  the  national 
bank  notes,  amounting  to  243,028  yen,  which  were  withdrawn 
during  the  period  from  November,  1881,  to  the  end  of  1885, 
on  account  of  the  stopping  of  business  of,  or  the  decreasing 
of  the  number  of  shares  of,  the  national  banks.  Forged  paper 
money  amounting  to  19  yen  was  also  withdrawn.  In  May, 
1883,  the  privileges  which  had  been  granted  to  the  Fifteenth 
National  Bank — the  privilege  of  issuing  2,400,000  yen  beyond 
the  legal  limit — was  taken  away,  and  the  bank  was  ordered  to 
withdraw  2,400,000  yen.  In  consequence  of  the  above  expe- 


Il6       WAR   AND   ARMAMENT   LOANS:   ECONOMIC    EFFECTS 


dient  the  government  and  bank  paper  money  were  consider- 
ably withdrawn  after  1881,  and  their  circulation  witnessed  a 
remarkable  decrease.  We  give  below  the  amount  of  both 
sorts  of  paper  money  redeemed  after  1882. 

REDEMPTION  OF  PAPER  MONEY  AND  BANK  NOTES  1 


Year 

Government  Paper 
Money  Redeemed 

Bank  Notes 
Redeemed 

Total  Amount  of 
Redemption 

1882  

Yen 
536,181 

Yen 
1  1  ,460 

Yen 
547  65O 

1883  

7,  -260.  7^7 

100.613 

7.47Q  15O 

1884.  . 

4,619,044 

3,259,794 

7,  878,  837 

1  88s.  . 

5,  0^5,  137 

860,  553 

5.8Q5  600 

1886  

20,544,258 

65^,005 

21,198  162 

1887  

I  1,085,704 

807,  -;si 

12,  881.  145 

1888  

9,080,311 

024,477 

10  004  788 

1889  

5,543,803 

940,451 

6,484,254 

I  8qo  .  . 

7,918,216 

928,485 

8,846,701 

1891  .  . 

5,  -185,904 

041,212 

6,^27,206 

1  892  .  . 

7.058,476 

Q78,  QQ9 

8,O^7.47S 

189^  .  . 

4.4.21.244. 

I.I34.3QI 

c  ,SSS  6"*^ 

1894.  . 

3,002,453 

974,322 

7,076,  77S 

1895.  . 

2,275,323 

985,010 

^,260,  •*•*•* 

1896.  . 

1.75^,052 

4,298,897 

6.O5I,Q4Q 

1897.  . 

I,Q2S,O7'* 

II.473.l6o 

I^.^Q8.2^t 

1898      

2  O^Q.^71 

3,IS8,l66 

S.IQ7  5^7 

1809  .  . 

5,411,727 

1,866,563 

7.278.2QO 

Total  

ICK,QOS,IO4 

34,^96.816 

I4O,3O2,OIO 

Total  since  1868  

I2^,^5.5Q7 

35SOOI-.140 

I  s8  ^^6  046 

Thus,  during  the  period  extending  from  November,  1881, 
to  March  31,  1890,  the  withdrawal  of  both  national  bank 
and  government  paper  money  amounted  to  83,839,700  yen  and 
3,730,000  yen,  respectively.  The  withdrawal  was  carried  on 
steadily  and  there  was  a  simultaneous  increase  in  the  specie 
reserve,  and  thus  the  foundation  of  the  convertible  note  system 
was  laid.  A  convertible  bank  note  system  was  established  by 
Dajokwan  Notification  No.  18,  May,  1884.  On  May  9,  1885, 
the  Bank  of  Japan  issued  for  the  first  time  convertible  bank 
notes.  The  following  table  shows  the  circulation  of,  and  the 

1  Based  upon  A  Summary  of  the  Circumstances  Attending  the  Monetary  System 
Reform  and  History  of  Finance  in  the  Meiji  Era,  vol.  XII.  The  figures  below  yen 
have  been  omitted.  The  redemption  of  government  paper  money  was  accom- 
plished in  December,  1899,  and  that  of  bank  notes  in  November,  1899. 


EFFECTS   ON    PUBLIC   FINANCE 


specie  reserve  for,  government  and  bank  paper  money,  and 
convertible  bank  notes: 

GOVERNMENT  AND  BANK  PAPER  MONEY  AND  CONVERTIBLE  BANK  NOTES l 


Calendar 
Year 

Amount  of 
Circulation  of 
Government 
Paper  Money 

Amount  of 
Circulation  of 
National 
Bank  Paper 
Money 

Total 

Specie 
Reserve 
in  the 
Treasury 

Convertible 
Bank  Notes 

Specie 
Reserve  for 
Convertible 
Notes 

1882    

Yen 
109,369,014 

Yen 
34,385,349 

Yen 
143,754,363 

Yen 

Yen 

Yen 

1883  

97,999,277 

34,275,735 

132,275,012 

25,876  230 

1884  

93,380,233 

31,015,942 

124,396,175 

33,569,188 

1885  

88,345,096 

30,155,389 

118,500,485 

42,265,640 

3.956  161 

3,311  461 

1886      

67,800,846 

29,501,484 

97,302,330 

25  865  864 

1887  

55,815,044 

28,604,133 

84,419,178 

19,790,388 

1888  

46,734,740 

27,679,656 

74,414,397 

8,150,822 

62,995,518 

45  022  871 

1889  

40,913,034 

26,739,205 

67,652,240 

10,709,950 

74,297,005 

57,409,299 

1890      .... 

34,272,447 

25,810,720 

60,083,167 

25  ooo  ooo 

IO2  931  766 

The  decrease  of  government  and  national  bank  paper 
money,  together  with  the  increase  of  specie  reserve,  brought 
about  the  rehabilitation  of  the  price  of  paper  money,  which 
was  accompanied  by  the  fall  of  prices  and  money  interest. 
This  was  followed  by  the  excess  of  exportation  over  importa- 
tion and  resulted  in  the  influx  of  metallic  currency.  The 
following  table  shows  the  annual  average  price  of  paper  money 
equivalent  to  one  yen  gold  or  silver  coin  after  1882: 

PAPER  MONEY  EQUIVALENTS  IN  GOLD  AND  SILVER  CoiN2 


Year 

Paper  Money  Equivalent 
to  One  Yen  in  Gold  Coin 

Paper  Money  Equivalent 
to  One  Yen  in  Silver  Coin 

1882  

I  .690 

i  .571 

1883  

I  .394 

1  .264 

1884    

1  .198 

i  .089 

i88s.  . 

I  .218 

i  .055 

1886  

1  .246 

i  .000 

The  specie  reserve  for  the  government  paper  money  and 
convertible  bank  notes  steadily  rose  in  amount,  exceeding  50,- 
000,000  yen  after  1887,  while  on  the  other  hand  there  was  a 

1  Based  on  A  Summary  of  the  Circumstances  Attending  the  Monetary  System  Re- 
form and  The  History  of  Finance  in  the  Meiji  Era,  vol.  XII. 

2  Based  on  A  Summary  of  the  Circumstances  Attending  the  Monetary  System 
Reform.     After  1886  the  price  of  bank  paper  money  was  restored  to  par,  and  for 
this  reason  we  have  omitted  the  figures  after  that  date. 


Il8       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

decrease  of  paper  money  and  increase  of  convertible  bank 
notes.  This  state  of  affairs  suggested  the  arrival  of  a  unique 
opportunity  for  accomplishing  a  fundamental  reform  in  the 
monetary  system.  By  Imperial  Ordinance  No.  59,  July,  1888, 
therefore,  the  government  revised  the  Convertible  Bank 
Notes  Regulation,  by  which  the  Bank  of  Japan  was  authorized 
to  issue  over  and  above  the  specie  reserve,  convertible  notes 
within  the  limit  of  70,000,000  yen  on  security  reserve.  Of  the 
above,  some  27,000,000  yen  corresponded  to  the  unredeemed 
national  bank  paper  money  outstanding  on  January  I,  1889. 
The  issue  of  bank  notes  in  the  future,  therefore,  was  only 
allowed  in  proportion  to  the  degree  of  the  redemption  of  the 
bank  paper  money.  Further,  the  government  ordered  the 
Bank  of  Japan  to  make  a  loan  to  itself  within  the  limits  of  22,- 
000,000  yen  at  2  per  cent  interest  per  annum,  for  the  redemp- 
tion of  government  paper  money,  which  order  the  Bank  of 
Japan  duly  carried  out.  Although  the  government  paper 
money  had  been  in  circulation  at  par  and  very  little  demand 
was  made  for  its  exchange,  it  was  inconsistent  with  the  spirit 
of  the  conversion  system  that  inconvertible  government  paper 
money  upwards  of  one  yen,  amounting  to  about  32,000,000 
yen  (at  the  end  of  March,  1890),  should  be  left  in  circulation. 
The  government,  therefore,  with  a  view  to  putting  an  end  to 
its  circulation,  created  a  special  account  known  as  the  paper 
money  exchange  fund,  by  Law  No.  24,  1890,  to  which  were 
transferred  10,000,000  yen  out  of  the  reserve  fund  and  22,000,- 
ooo  yen  out  of  the  aforesaid  loan  from  the  Bank  of  Japan. 
Thus  the  exchange  of  government  paper  money  was  honestly 
pushed  forward.  By  Law  No.  6,  1898,  the  term  of  its  circula- 
tion was  limited  to  February  31,  1899.  In  exactly  five  years, 
counting  from  the  day  on  which  its  circulation  was  abolished 
(December  31,  1904),  the  exchange  and  withdrawal  were 
brought  to  a  close,  and  inconvertible  paper  money  completely 
disappeared  from  the  market.1  The  following  table  shows 
paper  money,  convertible  notes  and  specie  reserve,  with  the 
object  of  supplementing  the  preceding  table  and  also  of  show- 

1  Report  concerning  the  paper  money  adjustment. 


EFFECTS   ON    PUBLIC   FINANCE 


ing  the  circumstances  under  which  the  paper  money  was 
readjusted: 

PAPER  MONEY,  BANK  NOTES,  CONVERTIBLE  NOTES  AND  SPECIE  RESERVE! 


Calendar  Year 

Amount  of 
Circulation  of 
Government 
Paper  Money 

Amount  of 
Circulation  of 
of  Bank 
Notes 

Amount  of 
Circulation  of 
Convertible 
Notes 

Total 

Amount  of 
Specie 
Reserve 

1891  

Yen 
28,737,657 
21,409.432 
16,407,000 
13,404.547 
11,129,224 
9,376,172 
7,451,098 
5,411,726 
4,125,783 

Yen 
24,869,508 
23,890,509 
22,756,119 
21,781,79? 
20,796,786 
16,497,889 
5,024,729 
1.866,563 

Yen 
115,734.545 
125,843,363 
148,663,128 
149,813,700 
180,336,815 
198,313,896 
226,229,058 
197,399,901 
250,562,040 

Yen 
169,341,710 
171,143,304 
187,826,247 
185,000,045 
212,262,825 
224,187,957 
238,704,885 
204,678,190 
254,687,823 

Yen 
83,678,333 
66,158,265 
97,928,516 
90,718,291 
68,370,797 
140,095,192 
105,226,473 
96,535,239 
110,142,169 

1892                   

1893    

1894  

1895                     

1896    .           

1897  

1898  

1899  

Readjustment  of  Conversion 

FIRST   NATIONAL   LOAN   CONVERSION 

The  first  national  loan  conversion  scheme  was  realized  by 
the  issue  of  the  consolidated  public  loans  during  the  period 
extending  from  1886  to  1897.  Except  for  the  fact,  however, 
that  this  consolidation  was  favored  by  the  success  of  paper 
money  readjustment,  and  that  two  or  three  war  loans  were 
readjusted  by  this  process,  it  can  not  be  said  that  there  existed 
any  intimate  connection  between  war  loans  and  the  consoli- 
dated loan. 

The  national  loans  which  had  been  issued  since  the  Restora- 
tion were  floated  for  a  variety  of  purposes,  now  to  meet  the 
exigencies  of  political  changes  and  reforms,  now  for  national 
defense  and  increase  of  armament,  now  for  productive  indus- 
tries, etc.  The  provisions  with  regard  to  these  loans  were 
found  in  various  regulations.  The  rate  of  interest,  terms  of 
redemption  and  other  details  of  loan  were  different  in  the 
extreme,  one  from  the  other.  In  other  wrords,  there  was 
great  complexity  in  the  treatment  of  these  public  bonds,  which 

1  Based  upon  A  Summary  of  the  Circumstances  A  ttending  the  Monetary  System 
Reform  and  Finance  Department  Reference  Book  Concerning  Monetary  Affairs. 
The  amount  of  specie  reserve  is  the  aggregate  sum  of  the  specie  reserve  for  govern- 
ment and  bank  paper  money,  and  the  specie  reserve  for  convertible  bank  notes.  The 
amount  of  specie  reserve  for  bank  paper  money  at  the  end  of  1897  and  1898  is  the 
figure  in  September,  1898. 


I2O       WAR   AND   ARMAMENT    LOANS:    ECONOMIC    EFFECTS 

put  the  Finance  Department  to  great  inconvenience.  Just 
then  the  work  which  had  been  commenced  in  January,  1886, 
was  proving  a  success  in  the  way  of  readjusting  the  paper 
money;  and  the  conversion  system  was  also  initiated.  As  a 
result,  the  value  of  paper  money  was  restored  to  par.  The 
money  interest  was  lowered  through  the  gradual  development 
of  monetary  organs,  and  interest  on  deposits  fell  to  between  3 
and  4  per  cent.  Prices  of  various  public  bonds  bearing  more 
than  6  per  cent  interest  all  commanded  a  premium.  Such 
having  been  the  case,  the  time  may  be  said  to  have  arrived 
for  the  government  to  convert  the  national  loans  bearing 
high  interest  in  order  to  reduce  the  expenditure  of  the  national 
Treasury  and  the  burden  of  the  nation  on  one  hand,  and  in 
order  to  consolidate  and  readjust  various  public  loans  on  the 
other.  On  April  I,  1886,  the  total  amount  of  unredeemed 
national  loans  stood  at  260,822,609  yen.  If  we  exclude  from 
the  above  sum  68,097,237  yen  at  5  per  cent  and  17,620,033 
yen  at  above  6  per  cent,  in  which  the  term  of  redemption  could 
not  be  changed,  the  public  debts  bearing  above  6  per  cent 
interest  and  amenable  to  readjustment  by  conversion  were 
still  estimated  at  175,203,340  yen.  Therefore,  the  govern- 
ment, with  a  view  to  redeeming  these  high  interest-bearing 
debts,  by  the  issue  of  a  5  per  cent  consolidated  public  loan 
totalling  175,000,000  yen  in  round  numbers,  promulgated 
by  Imperial  Ordinance  No.  66,  October,  1886,  a  Consolidated 
Public  Loan  Regulation. 

Details  with  regard  to  it  were  laid  down  by  Financial  De- 
partment Order  No.  30  of  the  same  month.  Later,  provisions 
with  regard  to  the  extraordinary  issue  were  added  by  Imperial 
Ordinance  No.  46,  June,  1888,  which  was  enforced  side  by 
side  with  the  provisions  concerning  the  ordinary  issue.  Ac- 
cording to  the  various  regulations  mentioned  above,  we  note 
three  methods  by  which  high  interest-bearing  debts  were  con- 
verted into  consolidated  public  loans.  The  first  was  an  ordi- 
nary subscription,  i.e.,  designed  to  raise  funds  from  the  public 
at  large  and  to  repay  high  interest-bearing  debts  in  cash.  The 
second  was  an  extraordinary  special  issue  method,  i.e.,  to 


EFFECTS   ON    PUBLIC   FINANCE  121 

make  the  Deposit  Bureau  purchase  the  consolidated  public 
loan  at  the  current  price  and  to  clear  off  high  interest-bearing 
public  loans  with  the  money  thus  obtained.  The  third  was 
the  bond  exchange  method,  i.e.,  to  exchange  the  high  interest- 
bearing  public  bonds  into  the  consolidated  public  bonds.  The 
public  debts  bearing  interest  upwards  of  6  per  cent  which  were 
redeemed  and  converted  by  these  devices  during  the  period  ex- 
tending from  1886  to  1893  were  hereditary  pension  bonds, 
Nakasendo  Railway  bonds,  loans  for  encouragement  of  in- 
dustries and  Kinsatsu  exchange  bonds.  As  a  surplus  was 
secured  in  excess  of  the  estimated  amount,  an  item  in  the  form 
of  the  redemption  of  the  temporary  loan  for  the  suppression  of 
rebellion  was  added  from  1895,  which  also  was  thus  completely 
repaid  in  May,  1897. 

The  issue  of  the  consolidated  public  loan  finally  totaled  173,- 
017,647  yen.  Though  the  consolidated  public  loan  amounted 
to  such  a  huge  sum,  the  kinds  of  war  loans  which  were  re- 
deemed with  it  were  only  "Kinsatsu"  exchange  bonds  and  tem- 
porary loans  for  the  suppression  of  rebellion. 

SECOND   NATIONAL   LOAN   CONVERSION 

The  second  conversion  of  national  loans  was  the  so-called  4 
per  cent  conversion  which  was  carried  out  on  several  occasions 
during  1910  and  had  a  great  deal  to  do  with  war  and  armament 
loans. 

As  a  result  of  the  war  of  1904  to  1905  the  domestic  loans 
increased  by  over  667,000,000  yen.  The  nationalization  of 
railways  which  took  place  after  the  war  added  over  475,000,- 
ooo  yen.  Thus,  the  total  amount  of  domestic  loans  at  the 
end  of  December,  1909,  reached  1,419,874,689  yen,  of  which 
the  old  public  loan,  the  navy  loan,  the  consolidated  loan,  the 
military  loan,  the  railway  loan,  the  public  undertakings  loan, 
the  Hokkaido  railway  loan,  the  Formosan  public  undertakings 
loan,  totalling  529,854,389  yen,  had  already  become  overdue. 

In  view  of  these  circumstances,  the  government  adopted  the 
policy  of  readjustment,  when  the  great  war  approached  its  end, 
thinking  that  this  was  the  most  important  of  all  the  postbellum 


122       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

financial  policies.  To  carry  on  the  repayment  of  loans,  and 
thus  keep  up  the  national  credit,  a  sinking  fund  was  created, 
and  by  taking  advantage  of  the  high  credit  which  the  govern- 
ment thus  maintained,  it  decided  to  effect  the  conversion  into 
a  lower  rate  of  interest.-  We  shall  speak  about  the  creation  of 
the  sinking  fund  later  on,  and  shall  treat  here  only  of  the  con- 
version to  a  lower  interest  rate.  The  time  for  conversion, 
however,  had  not  easily  arrived.  But  with  the  beginning  of 
1910  the  balance  of  trade  became  favorable,  the  monetary 
circulation  grew  sluggish,  rate  of  interest  steadily  fell,  and  the 
quotations  of  public  debts,  which  had  long  been  below  par,  rose, 
at  last  commanding  a  premium.  Taking  advantage  of  these 
favorable  circumstances  of  the  money  market,  the  govern- 
ment decided  upon  converting  the  5  per  cent  public  loan  into 
a  4  per  cent  loan,  and  by  Financial  Department  Order  No.  5, 
February  5,  1910,  it  promulgated  a  regulation  concerning  the 
issue  of  the  first  4  per  cent  public  loan.  The  most  important 
conditions  with  regard  to  its  issue  were  as  follows: 

(1)  The  total  amount  of  issue  shall  be  100,000,000  yen. 

(2)  The  rate  of  interest  shall  be  4  per  cent  per  annum. 

(3)  The  principal  shall  be  redeemable  within  fifty  years 
after  the  lapse  of  ten  years,  during  which  it  is  to  remain  unre- 
deemed. 

(4)  The  minimum  issue  price  shall  be  95  yen  per  value  100 
yen. 

(5)  The  5  per  cent  national  loan  bonds,  which  have  already 
been  issued,  can  be  substituted  for  cash  in  subscribing  to  the 
present  loan. 

The  representatives  of  fifteen  banks  in  Tokyo  and  Osaka 
were  summoned  and  they  were  induced  to  organize  an  under- 
writing syndicate  to  manage  the  general  subscription.  An 
agreement  was  entered  into  that  in  case  the  amount  subscribed 
fell  short  of  the  amount  offered  the  syndicate  should  take  the 
amount  unsubscribed.  On  the  close  of  subscription  the  total 
sum  responded  to  was  found  to  be  180,774,400  yen,  of  which 
120,000,000  yen  was  subscribed  in  cash. 

The  first  subscription  having  been  crowned  with  success, 


EFFECTS    ON    PUBLIC   FINANCE 


123 


the  government  decided  to  prosecute  a  further  conversion. 
On  March  15,  1910,  a  project  for  the  second  conversion  was 
published.  The  total  amount  offered  was  100,000,000  yen, 
and  the  conditions  were  nearly  the  same  as  those  of  the  first 
conversion,  except  that  much  more  convenience  was  offered 
for  the  exchange.  Besides  the  body  of  underwriting  banks 
(which  was  more  in  number  than  on  the  previous  occasion) 
the  brokers  of  the  Tokyo  Stock  Exchange  organized  another 
syndicate  for  subunderwriting.  The  total  amount  of  the 
second  flotation  figured  up  to  151,759,900  yen,  of  which  sub- 
scriptions in  cash  amounted  to  only  58,402,350  yen.  The 
final  amount  of  subscription  of  the  two  preceding  conversions 
was  as  follows: 


Subscription  and  Issue 

First  Conversion 

Second  Conversion 

Total 

Amount  subscribed  .... 
In  cash  

Yen 
100,000,000 

i,  1,^16,000 

Yen 
100,000,000" 
750.000 

Yen 
200,000,000 

•*2,O7S  QOO 

In  substitutes  . 

68,683,100 

QQ  24.1  OOO 

167,024  100 

Amount  issued  

QS.ooS.A?'* 

95,002,589 

190,011,062 

In  this  way  was  cleared  off  190,000,000  yen  out  of  520,000,- 
ooo  yen  of  5  per  cent  public  loans  that  had  then  become  due. 
Out  of  the  remainder  of  330,000,000  yen,  the  total  of  150,000,- 
ooo  yen  had  flowed  out  of  the  country  partly  by  the  endorse- 
ment of  the  government  and  partly  by  the  exportation  of 
individuals.  This  latter  sum  could  be  redeemed  through  the 
flotation  of  a  foreign  loan  in  the  future,  but  the  remaining 
170,000,000  yen  in  round  numbers  must  be  converted  accord- 
ing to  the  principle  adopted  by  the  government,  which 
necessitated  the  flotation  of  the  third  4  per  cent  loan.  The 
circumstances  of  the  money  market,  however,  were  not 
favorable  to  the  conversion  issue,  and  the  government  was 
obliged  to  change  its  policy.  Repayment  in  cash  was  made 
the  principle,  and  the  delivery  of  4  per  cent  bonds  was  made 
only  on  special  application.  To  obtain  the  funds  for  this 
repayment  the  flotation  of  foreign  loans  was  decided  upon. 


124       WAR   AND   ARMAMENT    LOANS:    ECONOMIC    EFFECTS 

Happily,  the  credit  of  our  loans  in  the  English  and  French 
money  markets  just  then  began  to  increase.  In  the  first 
place,  the  government  negotiated  with  French  capitalists, 
and  in  April,  1910,  the  subscription  of  a  4  per  cent  French 
loan  was  concluded,  and  the  issue  of  the  bonds  took  place 
on  May  16.  Its  terms  were  that  the  rate  of  interest 
should  be  4  per  cent  per  annum,  that  its  issue  price  should  be 
95.5,  that  the  term  during  which  it  was  to  remain  unredeemed 
should  be  ten  years,  that  the  term  of  redemption  should  be 
fifty  years  after  outstanding  for  ten  years.  The  amount 
actually  received  was  159,347,250  yen,  in  terms  of  our  cur- 
rency. In  the  second  place,  the  government  entered  into 
negotiations  with  English  capitalists,  and  on  May  n,  1910, 
the  third  4  per  cent  sterling  loan  amounting  to  £11,000,000 
was  concluded,  and  the  issue  of  the  bonds  took  place  on  May 
27  and  on  August  17.  The  most  important  of  the  terms  were 
that  the  rate  of  interest  should  be  4  per  cent  per  annum,  that 
the  issue  price  should  be  95,  that  the  term  during  which  it  was 
to  remain  unredeemed  should  be  ten  years,  that  the  terms  of 
redemption  should  be  fifty  years  after  outstanding  for  ten 
years,  and  that  in  case  endorsed  5  per  cent  public  bonds 
were  substituted  for  cash,  the  charge  should  be  10  shillings 
per  1,000  pounds. 

The  final  result  of  the  flotation  was  that  the  amount  of  sub- 
scription substituted  in  5  per  cent  bonds  was  £4,798,200  and 
subscription  in  cash  £6,201 ,800,  the  total  amount  thus  reach- 
ing 97474*999  yen>  *n  terms  of  our  currency. 

A  part  of  the  actual  receipts  by  the  sterling  and  French 
loans  amounting  to  over  256,800,000  yen  was  employed  for  the 
redemption  of  the  navy,  consolidated,  war,  5  per  cent  excheq- 
uer, and  Formosan  public  undertakings  loans,  etc.  (excepting 
those  which  were  endorsed),  totalling  190,092,000  yen,  which 
had  reached  the  termination  of  the  period  for  which  they  were 
to  remain  unredeemed. 

The  following  provisions  were  made  for  those  who  applied 
for  4  per  cent  domestic  loan  bonds  instead  of  cash : 

(i)  The  first  4  per  cent  domestic  bonds  should  be  delivered 
at  95  per  cent. 


EFFECTS   ON    PUBLIC   FINANCE  125 

(2)  The  national  loans  which  had  not  yet  fallen  due  were 
permitted  to  be  converted  on  request. 

(3)  The  interest  should  be  reckoned  from  the  first  day  of  the 
month  in  which  the  application  was  made. 

By  these  stipulations  the  conversion  by  the  first  4  per  cent 
domestic  loan  was  encouraged.  This  was  practically  the  third 
4  per  cent  conversion,  but  in  point  of  form  the  bond  was 
exactly  the  same  as  that  of  the  first  4  per  cent  domestic  loan. 
With  these  the  5  per  cent  domestic  loans  which  had  now 
become  redeemable,  and  passed  the  term  for  which  they  were 
to  remain  unredeemed,  were  all  converted  into  4  per  cent 
bonds,  or  else  repaid  in  cash,  and  thus  the  4  per  cent  conversion 
program  was  temporarily  completed. 

The  actual  receipt  of  the  above  domestic  and  foreign  loans 
subscribed  on  several  occasions,  the  sum  transferred  from  the 
general  account  in  1910  to  meet  the  repayment  of  the  national 
loans,  and  the  sum  carried  over  from  the  fiscal  year  1909,  con- 
stituting the  fund  for  repaying  the  5  per  cent  public  debts 
which  had  fallen  due,  were  respectively  as  follows: 

Yen 

Raised  by  public  loans • 517.477. 53** 

Transferred  from  the  general  account 60,800,000 

Carried  over  from  1909 21 ,747,395 

Total 600,024,935 

The  amount  of  the  5  per  cent  domestic  loan  repaid  by  the 
above  funds  was  as  follows: 

Yen 

Repaid  in  cash 249,908,591 

Substitute  payment  and  conversion  by  4  per  cent  loans 273,218,075 

Total  sum  of  5  per  cent  domestic  loan  redeemed 523,126,666 

Again  the  kinds  of  the  public  debts  repaid  are  shown  as 
follows: 

Yen 

Navy  loan  (entire  sum) 8,296,700 

Consolidated  loans  (entire  sum) 162,552,200 

War  loan  (entire  suni) • 1 13,398,950 

5%  public  loan  (entire  sum  then  redeemable) 137,502,850 

5%      "         "     (Mark  ko) 3,296,600 

5%      "         "     (Mark  otsu) 1,585.900 

5%                       (special) 20,474,200 

The  second  exchequer  bond  (entire  sum) 56,359,250 


126       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

Yen 

The  third  exchequer  bond 12,011,625 

Tobacco  monopoly  exchequer  bond 7,441,450 

The  first  and  the  fourth  exchequer  bond 10,175 

Formosan  public  undertaking  loan  (entire  sum) 92,735 

4%  loan  of  second  issue 3.250 

4%  sterling  loan  of  second  issue 781 

Debentures  of  "Sobu  "  railway 100,000 


Total 523,126,666 

The  issue  of  the  4  per  cent  public  loan  against  the  above, 
and  the  amount  of  5  per  cent  public  loans  redeemed  by  the 
actual  receipt  of  the  issue,  are  shown  as  follows: 

Yen 
Amount  of  issue  of  4%  domestic  and  foreign  loan: 

4%  loan  of  first  issue 176,029,350 

4%  loan  of  second  issue 99,999, 500 

4%  loan  (issued  in  Paris) 175,150,000 

4%  sterling  loan 107,393,000 

—     558,571,850 
Amount  of  5%  loan  redeemed  by  actual  receipt 5I8,4i3,383 

Balance  (increased  amount  of  new  loans) 40,158,467 


The  4  per  cent  conversion  saved  the  national  Treasury  the 
annual  interest  charge  of  3,645,000  yen,  though  it  increased 
simultaneously  the  capital  amount  by  40,158,467  yen.  This 
computation,  however,  does  not  reveal  the  entire  truth,  be- 
cause the  authority  relied  upon  for  this  estimate  is  the  Finance 
Department,  which  did  not  take  the  face  value  into  considera- 
tion. If  computation  of  the  issue  and  redemption  of  domestic 
and  foreign  loans  had  been  according  to  their  face  value,  the 
disadvantage  of  capital  increase  would  have  been  so  great  as  to 
reduce  to  the  minimum  the  advantage  in  the  way  of  interest 
curtailment.  Be  the  matter  what  it  may,  there  is  no  doubt 
that  on  account  of  this  conversion,  war  and  armament  loans 
such  as  military  loan,  navy  loan  and  exchequer  bonds  were 
greatly  readjusted. 

Fund  for  the  Readjustment  of  the  National  Loans 

Our  country  came  out  of  the  Russo-Japanese  War  with  an 
enormously  increased  national  debt.  As  soon  as  the  war  was 
over,  the  authorities  attached  the  greatest  importance  to  re- 
payment and  readjustment  of  all  the  postbellum  finances.  A 


EFFECTS    ON    PUBLIC   FINANCE  127 

fund  for  the  readjustment  of  national  loans,  therefore,  was 
created,  which  exists  to  this  day.  The  creation  of  a  fund  aim- 
ing at  the  readjustment  of  national  loans,  however,  was  not 
an  innovation  of  this  period.  There  was  a  regulation  called 
the  "Sinking  Fund  Regulation,"  in  the  beginning  of  the  Res- 
toration, for  meeting  excessive  national  debts  and  for  neutral- 
izing the  disorder  of  the  monetary  system.  We  shall,  there- 
fore, treat  of  the  subject  historically. 

The  first  fund  for  the  readjustment  of  national  loans  origi- 
nated in  the  national  Treasury  reserve  fund,  established  in 
October,  1869.  This  reserve  fund  consisted  of  the  proceeds 
from  the  sale  of  disused  articles  and  miscellaneous  receipts 
other  than  out  of  taxes.  To  this  reserve  fund  were  added  old 
clan  paper  money  reserve  and  various  new  and  old  coins  extant 
in  the  national  Treasury.  These,  put  together,  were  made 
the  reserve  fund  for  the  withdrawal  of  paper  money  and  public 
loans  in  June,  1872.  Thereafter  the  amount  saved  by  the  cur- 
tailment of  the  annual  expenses  was  paid  into  the  fund.  Gold 
and  silver  bullion,  old  coins  and  public  bonds  were  bought,  and 
thus  the  recoinage  and  the  profit  was  planned.  In  July,  1878, 
the  reserve  fund  for  the  withdrawal  of  paper  money  and  the 
fund  for  the  adjustment  of  national  loans  were  separated  from 
each  other,  the  former  fund  being  fixed  at  10,000,000  yen  and 
the  latter  at  20,000,000  yen.  To  the  latter  fund  was  annually 
transferred  20,000,000  yen  out  of  the  general  annual  account 
that  it  might  be  appropriated  to  the  redemption  of  public 
bonds  every  financial  year.  Its  surplus  was  put  aside  and  the 
interest  accumulated.  Since  then  the  repayment  of  national 
bonds  was  steadily  carried  on  by  this  method,  the  endeavor 
being  made  at  the  same  time  to  increase  the  fund.  After  1882, 
however,  the  system  of  conversion  was  established,  and  stocks 
recovered  their  credit,  thus  minimizing  the  necessity  of  the 
accumulation  of  the  fund.  In  February  of  1886,  it  was  pro- 
vided that  the  fund  for  the  readjustment  of  national  bonds 
should  be  abandoned  after  the  financial  year  1885.  The 
money  extant  at  the  time  of  the  abolition  amounted  to  26,922,- 
265  yen,  of  which  11,477,378  yen  was  transferred  to  the  gen- 
eral annual  account  to  take  care  of  expenditures  for  the 


128       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

redemption  of  national  loans.  The  remaining  15,444,886 
yen  was  returned  to  the  reserve  fund  for  paper  money  con- 
version. 

The  second  fund  for  the  readjustment  of  national  loans  was, 
as  above,  created  upon  the  termination  of  the  Russo-Japanese 
War.  The  amount  of  war  loans,  inclusive  both  of  domestic 
and  foreign  loans  which  had  been  raised  during  the  Russo- 
Japanese  War,  amounted  to  the  huge  sum  of  over  1,300,000,- 
ooo  yen. 

After  the  conclusion  of  the  war,  i.e.,  in  the  financial  year 
1906,  the  public  loan  amounting  to  463,000,000  yen  was 
planned  to  be  raised  for  the  replenishment  of  the  extraordinary 
affairs  and  extraordinary  military  expenditures.  In  short,  the 
total  amount  of  the  public  debts  on  account  of  this  war 
reached  more  than  1,763,000,000  yen.  If  we  add  to  this  sum 
unredeemed  public  debts  outstanding  before  the  outbreak  of 
the  war,  which  came  to  over  535,000,000  yen,  the  entire  sum 
reached  approximately  2,300,000,000  yen.  There  had  been 
created  in  the  ordinary  annual  account  an  item  called  national 
loans  expenditure  for  the  redemption  of  old  loans.  For  the 
new  loans,  however,  amounting  to  1,763,000,000  yen,  anew 
program  for  adjustment  was  yet  to  be  made.  By  Imperial 
Ordinance  No.  236,  November,  1905,  the  government  pro- 
mulgated a  regulation  with  regard  to  the  organization  of  a 
bureau  for  the  readjustment  of  extraordinary  national  loans. 
During  the  twenty-third  session  of  the  Diet  it  introduced  a 
special  financial  bill  relating  to  the  fund  for  the  readjustment 
of  national  loans,  which  was  duly  approved  by  the  Diet  and 
was  promulgated  in  the  redemption  and  readjustment  of  war 
loans;  but  it  had  also  as  an  auxiliary  object  to  readjust  the 
old  and  other  new  loans.  Therefore,  it  was  provided  that  a 
sum  not  less  than  110,000,000  yen  must  be  annually  received, 
from  the  general  account  for  the  disbursement  of  war  loans. 
The  fund  for  the  disbursement  of  other  national  loans  was  to 
be  provided  out  of  the  national  loans  expenditure  of  the  gen- 
eral account,  and  out  of  the  similar  item  in  the  special  account 
in  accordance  with  the  annual  budget  estimates. 


EFFECTS   ON    PUBLIC   FINANCE  1 29 

A  program  had  already  been  established  to  appropriate  an 
annual  amount  of  about  40,000,000  yen  for  the  cancellation  of 
old  loans.  The  amount  transferred  from  the  general  account 
to  the  fund  for  the  readjustment  of  national  loans  was  about 
150,000,000  yen  in  all.  Of  this  about  120,000,000  yen  being 
required  for  the  interest  charge,  only  about  30,000,000  yen 
was  to  be  appropriated  to  the  discharge  of  the  principal. 
After  the  financial  year  1909  the  government  strenuously 
endeavored  to  redeem  the  national  loans.  The  annual 
amount  to  be  appropriated  for  the  repayment  of  principal  was 
brought  up  to  not  less  than  50,000,000  yen, 

From  the  following  fiscal  year  onward,  the  surplus  amount 
of  interest  accumulated  by  the  redemption  of  each  preceding 
financial  year  was  appropriated  to  the  redemption  of  principal. 
It  was  not  long,  however,  before  this  program  ended  in  fail- 
ure, on  account  of  the  armament  expansion.  Moreover,  the 
annual  amount  appropriated  to  the  redemption  of  principal 
was  reduced  to  not  less  than  30,000,000  yen,  by  the  revised 
law  of  1915. 

Expenditures  for  the  National  Loans 

The  expenditure  for  the  national  loans  is  a  special  name 
given  to  the  division  of  our  budget  which  included  not  only 
the  redemption  and  payment  of  the  principal  and  interest  of 
the  domestic  and  foreign  loans,  but  also  the  payment  of  the 
expenses  for  the  issue  of  the  bonds,  the  fees  for  the  manage- 
ment and  other  miscellaneous  expenses.  But  the  redemption 
of  the  principal  and  the  payment  of  interest  of  the  national 
loans  undoubtedly  formed  the  two  most  important  items. 
Inasmuch  as  the  nature  of  this  expenditure  was  as  above 
mentioned,  it  was  quite  natural  that  its  amount  should  in- 
crease with  the  increase  of  the  national  loans.  The  increase 
of  war  loans,  especially,  had  remarkable  effects  upon  this 
expenditure.  The  table  on  the  next  page  substantiates  the 
above  statement. 

How  the  national  loans  expenditures  increased  year  by  year 
can  be  best  shown  by  comparing  the  rate  of  increase  of  this 
10 


I3O       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 


NATIONAL  LOANS  EXPENDITURE  AND  ITS  PROPORTION  TO  THE  TOTAL 
EXPENDITURE  l 


Fiscal 
Year 

National 
Loans 
Expenditure 

Percentage 
to  Total 
Expenditure 

Amount 
Redeemed 

Amount  of 
Interest 

Total 
Amount 
Principal  and 
Interest 

Yen 

Yen 

Yen 

Yen 

Fourth.  . 

439,337 

2.30 

437,151 

437,151 

Fifth..  .  . 

439,340 

0.70 

219,454 

437,151 

656,605 

Sixth  

2,996,039 

4.60 

707,454 

2,103,338 

2,810,792 

Seventh  . 

3,254,140 

4.00 

707,454 

2,464,440 

3,171,894 

Eighth  .  . 

i,593,o83 

2.40 

866,830 

866,830 

1875-  ••• 

4,645,302 

6.70 

1,339,995 

3,239,022 

4,579,017 

1876  

4,950,797 

8.30 

1,890,249 

2,999,217 

4,889,466 

1877-... 

16,774,928 

36.90 

975,855 

14,479,126 

15,454,981 

1878  

26,640,136 

47.50 

3,475,274 

15,111,498 

18,586,772 

1879.-.. 

21,749,652 

39-40 

3,575,757 

15,146,526 

18,722,283 

1880  

22,420,573 

37.10 

3,796,854 

15,417,032 

19,213,886 

1881.  ... 

27,747,123 

45-90 

3,949,289 

14,797,242 

18,746,531 

1882.  ... 

23,414,961 

39.10 

7,864,207 

14,330,534 

22,194,741 

1883.... 

28,658,303 

42.20 

5,425,294 

14,058,879 

19,484,173 

1884.  .  .  . 

19,819,615 

32.60 

4,290,101 

14,283,624 

18,573,725 

1885.... 

14,101,377 

29.60 

5,089,752 

8,016,848 

13,106,600 

1886.  ... 

24,090,611 

29.20 

21,022,267 

15,118,718 

36,140,985 

1887  

21,415,690 

27.40 

26,457,542 

15,179,127 

41,636,669 

1888  

20,717,784 

26.30 

31,198,368 

14,705,563 

45,903,931 

1889.  .  .  . 

18,362,110 

23.00 

15,885,758 

14,371,207 

30,256,965 

1890.  .  .  . 

20,317,932 

25.00 

5,361,401 

13,649,110 

19,010,511 

1891  

18,515-799 

21  .60 

24,157,111 

13,548,902 

37,706,013 

1892.  .  .  . 

18,517,168 

23.00 

49,596,238 

13,204,565 

62,800,803 

1893.-.. 

19,455,918 

23.10 

13,318,870 

11,817,932 

25,136,802 

1894.... 

19,721,143 

25.20 

4,108,798 

11,572,029 

15,680,827 

1895---. 

24,190,858 

28.70 

4,990,059 

14,431,091 

19,421,150 

1896.  .  .  . 

30,504,172 

I8.OO 

8,120,310 

16,847,503 

24,967,813 

1897.... 

27,300,959 

12  .20 

7,288,107 

18,006,785 

25,294,892 

1898  

27,284,287 

12  .40 

8,215,555 

19,485,675 

27,701,230 

1899.  ... 

32,885,787 

12.90 

1,644,874 

20,953,413 

32,598,287 

1900.  .  .  . 

34,501,485 

11.80 

9,775,705 

22,935,791 

32,711,496 

1901  .... 

35,777,814 

I3.40 

10,240,705 

23,286,450 

33,527,155 

1902  .... 

75,319,554 

26.OO 

13,795,880 

24,376,847 

38,172,727 

1903  .... 

35,895,399 

I4-38 

3,218,290 

25,890,462 

29,108,752 

1904.... 

44,193,194 

15.96 

219,455 

32,011,720 

32,231,175 

1905  .... 

124,398,585 

29.58 

40,472,173 

86,345,748 

126,817,921 

1906.  .  .  . 

156,415,134 

33-70 

176,932,122 

101,786,341 

278,718,463 

1907  .... 

176,504,590 

29.30 

247,296,460 

116,341,318 

363,637,778 

1908  .... 

178,942,644 

28.12 

97,297,030 

105,473,318 

202,770,348 

1909.... 

155,281,255 

29.14 

130,134,009 

116,456,018 

246,590,027 

1910.  .  .  . 

171,461,147 

33-54 

453,779,773 

121,983,960 

575,763,733 

1911  .... 

147,222,558 

25.16 

102,231,843 

117,962,842 

220,194,685 

1912.  .  .  . 

142,323,811 

24-39 

60,835,228 

114,876,828 

175,712,056 

1913  

142,949,794 

24.38 

57,047,796 

112,803,688 

169,851,484 

1  Based  upon  Financial  History  of  the  Meiji  Era  (with  regard  to  the  figures  prior 
to  twenty-fifth  fiscal  year)  and  upon  National  Loans  Statistics  (with  regard  to  later 
figures).  National  loan  expenditure  with  respect  to  funded  and  floating  loans, 
and  the  principal  redemption  and  interest  payment  of  ordinary  loans  only  were 
taken  into  account.  Though  the  principal  redemption  refers  only  to  ordinary 


EFFECTS   ON   PUBLIC   FINANCE 


item  with  the  total  amount  of  outlays  of  every  financial  year. 
And  the  considerable  increase  of  the  amount  of  the  principal 
redemption  and  interest  discharge,  which  forms  the  most 
important  items  of  the  expenditures,  may  easily  be  realized. 
The  table  on  this  page  distinguishes  between  domestic  and 
REDEMPTION  AND  INTEREST  PAYMENT  OF  DOMESTIC  AND  FOREIGN  LOANS  l 


Fiscal 
Year 

Redemption 
of  Domestic 
Loans 

Redemption 
of  Foreign 

Loans 

Total 

Payment  of 
Interests  on 
Domestic 
Loans 

Payment  of 
Interests  on 
Foreign 
Loans 

Total 

Fourth. 
Fifth  .  . 
Sixth  .  . 
Seventh 
Eighth. 
1875  

Yen 

219.454 
219,454 
219,454 

617,755 

Yen 

488,000 
488,000 

722  240 

Yen 

219,454 
707,454 
707,454 

1,339  995 

Yen 

850,171 
1,254,989 
109,101 
2,113  018 

Yen 
437.151 
437,151 
,253,167 
.209,452 
757,729 
,126  004 

Yen 
437,151 
437,151 
2,103,338 
2,464,441 
866,830 

3.239  022 

1876  

1,151,905 

738,344 

1,890,249 

1,925,481 

,073,736 

2,999  217 

1877  

219  455 

975  855 

1878  

2,700  330 

774  944 

3,475  274 

14  040  838 

070  660 

1879. 

2  780  8O5 

1880.  .  .  . 

816  426 

1881  

2,109  929 

790  786 

1882  

6,999  959 

864  248 

7  864  207 

13,606  700 

723  834 

1883  

5,022,694 

402  600 

5,425,294 

13.362  998 

695,881 

14,058  879 

1884. 

3  859  685 

328  938 

1885.  .  .  . 

4  629  080 

5  089  752 

7  335  689 

681  159 

8  016  848 

1886  

20  528  899 

493  368 

21  022,267 

14  444  495 

674,223 

15,118  718 

1887  

25,930,014 

527  528 

26,457  542 

14  509,776 

669,351 

15,179,127 

1888  

30,634,240 

564,128 

31,198,368 

14,075,712 

629,851 

14,705,563 

1889  

15,281,614 

60/1,  M/i 

15,885,758 

13,803,476 

567,731 

14,371,207 

1890  

4,715  289 

5  361  401 

13  169  476 

479.634 

13,649  no 

1891  

23,465  615 

691  496 

24  157  in 

13,105  014 

443,888 

13,548  902 

1892  
1893  

48,856,430 
12,527,334 

739,808 
791,536 

49,596,238 
13,318,870 

12,784,488 
TTi'M3iin'' 

420,077 
374,830 

13,204,565 

11,817,932 

1894  
1895.  •  •  • 

3,261,630 
4  083  355 

847,168 

4,108,798 
4  990  059 

11,223,882 
14,208  917 

348,147 
222,175 

11,572,029 

14,431,092 

1896  

7,150  654 

969  656 

8  120,310 

16,753,812 

93,690 

16,847,503 

1897  

7,054,355 

233,752 

7,288,107 

17,990,054 

16,731 

18,006,785 

1898  

8,215,555 

8,215,555 

19,485,675 

19,485,675 

1899.  .  . 

II  644  874 

TT  A/)/]  87/| 

19,003  234 

i,95O,I79 

20,953,413 

1900.  .  .  . 

9  775  7O5 

9  775.7O5 

19,030,575 

3,905,215 

22,935,791 

1901  

10  240,705 

10,240,705 

19.381,210 

3,905,239 

23,286,450 

1902  

13,705,880 

13,795,880 

20,479,779 

3,897,067 

24,376,847 

1903  

3,218,290 

3,216,290 

21,987,234 

3,903,228 

25,890,462 

1904. 

219  455 

219,455 

25,179,778 

6,831,942 

32,011,720 

1905  

40,472,173 

40,472,173 

45.OO9,I57 

41,336,591 

86,345,748 

1906  

176,916,501 

15.621 

176,932,122 

50,314,125 

51,472,216 

101,786,341 

1907  

32,525,105 

214,771,355 

247,296,460 

54,360,206 

61,981,315 

116,341,521 

1908  

97,297,030 

97,297,030 

53,671,651 

51,801,668 

105,473,319 

1909  

130,108,235 

25,774 

130,134,009 

64,697,410 

51,758,608 

116,456,018 

1910  

453,777,O4O 

2,733 

453,779,773 

63,240,519 

58,743,440 

121,983,960 

1911.  .  .  . 

92,465,330 

9,766,513 

102,231,843 

55,329,452 

62,633,390 

117,962,842 

1912  

51,068,930 

9,766,208 

60,835,228 

52,564,464 

62,312,364 

114,876,828 

1913  

42,401,737 

14,646,059 

57,047,796 

51,162.767 

61,640,921 

112.803,688 

loans,  it  includes  no  small  amount  of  conversion  loans,  which  accounts  for  the  fact 
that  the  aggregate  amount  of  principal  redemption  and  interest  payment  exceeds 
national  loans  expenditures.  The  total  amount  of  principal  and  interest  is  the 
aggregate  sum  of  the  amount  redeemed,  plus  the  amount  of  interest. 

1  Based  upon  Finance  Department  Investigation  of  National  Debts.  This  table 
does  not  include  temporary  loans,  exchequer  bonds,  and  railway  bonds.  The  figures 
In  the  eighth  period  could  not  be  ascertained  on  account  of  imperfect  materials,  and 
they  have  been  added  either  to  the  figures  of  the  seventh  period  or  the  eighth  fiscal 
year.  The  figures  of  interest  payment  for  the  second  fiscal  year  of  Taisho  are  based 
upon  rough  estimates. 


132       WAR   AND   ARMAMENT   LOANS:    ECONOMIC   EFFECTS 

foreign  loans,  with  regard  to  principal  redemption  and  inter- 
est payment. 

This  table  shows  that  the  amount  of  principal  redemption 
witnessed  a  noticeable  increase  in  the  financial  years  1878, 
1894  and  1904 — the  dates  of  the  Satsuma  Rebellion,  the  Sino- 
Japanese  War  and  the  Russo-Japanese  War,  respectively. 
After  the  financial  year  1904,  especially,  the  nominal  amount 
of  redemption  figured  up  to  a  huge  sum,  because  after  that 
date  the  method  of  repayment  by  conversion  was  resorted  to. 
But  as  the  domestic  loans  were  mostly  converted  into  foreign 
loans,  there  was  but  slight  repayment  of  foreign  loans,  except 
in  the  financial  year  1907.  It  may  be  said,  therefore,  that 
this  table  shows  in  an  indirect  way  that  there  was  a  steady 
increase  of  foreign  loans.  The  amount  of  interest  charge  is  in 
ratio  to  the  unredeemed  amount  of  national  loans  for  each 
fiscal  year.  Especially  was  this  true  after  the  fiscal  year 
1906  as  the  domestic  loans  were  gradually  converted  into 
foreign  loans  and  the  amount  of  interest  for  foreign  loans  far 
surpassed  that  of  domestic  loans,  while  the  amount  of  prin- 
cipal redemption  of  foreign  loans  was  very  small. 

Relation  between  National  Loans  Expenditures  and  Taxes 

The  expenditure  for  the  redemption  of  the  principal  and 
payment  of  interest  of  our  national  loans  was  disbursed  out 
of  the  ordinary  resources,  which  in  our  financial  system 
consisted  chiefly  of  taxes.  It  was,  therefore,  quite  natural 
that  the  increase  of  the  national  loan  expenditure  should 
bring  increase  of  taxes  in  its  train.  A  statistical  proof  of  the 
relation  between  the  taxes  and  the  expenditure  for  the  war 
and  armament  loans  is  no  easy  task,  because  the  expenditure 
for  the  redemption  and  interest  of  public  loans,  with  regard 
to  the  war  of  the  Restoration  and  the  Satsuma  Rebellion,, 
were  later  mingled  with  the  expenditure  for  those  of  the  con- 
solidated loans  which  unified  and  readjusted  various  other 
public  debts.  The  redemption  and  interest  charge  for  the 
consolidated  public  loan,  the  navy  loan,  the  war  loan  in  con- 
nection with  the  Sino-Japanese  War,  the  exchequer  bonds, 
and  extraordinary  military  expenditures  loans  were  all 


EFFECTS   ON   PUBLIC   FINANCE  133 

blended  into  the  redemption  and  interest  expenditure  of  the 
Imperial  Government  4  per  cent  loan,  or  that  of  foreign  loans. 
Thus  the  distinction  between  various  loans  expenditures 
became  very  obscure.  The  single  exception  was  the  repay- 
ment and  interest  expenditure  in  connection  with  the  Russo- 
Japanese  War  loan,  where  it  was  made  distinguishable  by 
legislation,  and  thus  the  kind  of  increased  taxes  for  that 
particular  purpose  was  very  clear.  Therefore,  with  regard 
to  this  loan  the  connection  between  the  redemption  and 
interest  expenditure  and  taxes  can  be  shown  fairly  well. 

At  the  outbreak  of  the  Russo-Japanese  War,  the  govern- 
ment, with  the  object  of  meeting  the  immense  war  expenses, 
twice  increased  or  created  extraordinary  special  taxes.  The 
first  consisted  of  the  Extraordinary  Special  Tax  Law  in  1904 
and  the  Supplementary  Budget  No.  I  for  the  financial  year 
1904,  which  were  approved  by  the  twentieth  session  of  the 
Diet,  March,  1904.  By  this  measure  the  extraordinary 
increase  of  the  land  tax,  income  tax,  business  tax,  sake  tax, 
soy  tax,  sugar  consumption  tax,  mining  tax,  bourse  tax, 
registration  tax,  Okinawa  prefecture  spirituous  liquors  export 
duties,  miscellaneous  import  duties  (customs  duties),  the 
introduction  of  the  tobacco  manufacture  monopoly  and  the 
creation  of  the  woolen  textiles  tax  and  kerosene  consumption 
tax  were  carried  out  to  provide  a  part  of  the  fund  for  the 
extraordinary  affairs  outlay  connected  with  the  war.  The 
estimated  annual  amounts  of  increased  revenue  by  this  first 
measure  was,  in  round  numbers,  62,000,000  yen.  The  second 
measure  consisted  of  the  revised  Extraordinary  Special  Tax 
Law  in  1905  and  the  supplementary  budgets  for  the  financial 
year  of  1905,  which  were  approved  by  the  twenty-first  session 
of  the  Imperial  Diet  in  November,  1904.  By  this  measure 
second  increases  of  the  land  tax,  income  tax,  business  tax, 
sake  tax,  sugar  consumption  tax,  mining  tax,  bourse  tax, 
registration  tax,  Okinawa  prefecture  spirituous  liquors  export 
duties  and  customs  duties,  were  carried  out;  together  with 
initial  increases  of  stamp  duty  and  patent  medicine  tax;  and 
the  fresh  creation  of  a  traveling  tax,  and  succession  tax,  and 
salt  monopoly.  These  were  introduced  to  provide  a  part  of 


134       WAR   AND   ARMAMENT   LOANS:   ECONOMIC    EFFECTS 


the  resources  for  the  immense  sum  required  by  the  extraordi- 
nary military  expenditures  additional  estimate,  and  by  the 
extraordinary  reserve  fund  estimates  for  the  fiscal  year  1905. 
The  estimated  amount  thus  obtained  was  74,120,000,000  yen. 

INCREASE  IN  TAX  AND  MONOPOLY  RECEIPTS  AUTHORIZED  BY  LAW,  1904  AND 

1905 


Kind 

First  Increase 

Second  Increase 

Total 

Land  tax  

Yen 
23,936,213 

Yen 
18,640,678 

Yen 
42,S76,8oi 

Income  tax  

S,  287,  "US 

5,286,462 

IO  673  777 

Business  tax  

5,0^6,100 

5  809  007 

10  845  206 

Sake  tax  

178  484 

2  566  083 

2  744  S67 

Soy  tax  

I.I38.9S2 

I.I38.QS2 

Sugar  consumption  tax  

8,212,382 

2,400  104 

10  612,486 

Mining  tax  

70,1  IS 

i  389  586 

I  468,701 

Tax  on  bourse  

5  ^2,  84.6 

432  S66 

Q6S  412 

Okinawa  spirituous  liquors  ex- 
porting    

•5,398 

66.S77 

7I.Q7S 

Customs  duty  

2,  330,6^3 

2,687,626 

S.OI8.2SO 

Patent  medicine  tax  

80,270 

8Q.27Q 

Woolen  textiles  tax  

2,138,661 

8  468  085 

10  606  776 

Kerosene  tax 

I  2^8  SQO 

I  2^8  SQQ 

Traveling  tax  

3,188,180 

3,188,180 

Succession  tax  

4  ioa  so6 

4.-JOO.SQ6 

Stamp  receipt  (registration  tax 
stamp  duty  and  fees) 

T,  62O  707 

2  ccc  T.OT, 

6  176,100 

Monopoly  receipt  

8,466,28S 

8,466,285 

Salt  monopoly  receipt  

16.2^0.667 

16,239,667 

Total  

62,201,879 

74,128,700 

136,330,678 

By  these  extraordinary  special  taxes  an  increase  of  taxation 
amounting  to  136,330,000  yen  in  round  numbers  was  effected, 
and  probably  the  amount  actually  received  exceeded  the 
estimated  sum.  In  spite  of  the  express  provision  of  the  law 
that  this  increased  taxation  should  be  abolished  with  the 
termination  of  the  war,  it  came  to  assume  a  permanent  nature 
with  the  establishment  of  the  national  loans  readjustment 
fund  in  the  fiscal  year  1906.  A  reflection  upon  the  financial 
program  of  the  time  will  clarify  the  circumstances  just  men- 
tioned. 

The  receipts  of  the  aforesaid  extraordinary  special  taxes 
were  the  sums  estimated  in  the  program.  Most  of  the  sub- 


EFFECTS   ON   PUBLIC  FINANCE 


135 


sequent  actual  receipts,  however,  were  mixed  with  the  taxes, 
rendering  the  distinction  very  obscure.  Later  in  the  fiscal 
year  1908,  the  increased  taxation  of  the  annual  amount  of 
about  $25,000,000  yen  was  added  to  by  the  increase  of  the 
sake  tax,  the  sugar  consumption  tax  and  tobacco  monopoly 
charges  and  the  re-creation  of  a  kerosene  consumption  tax. 
On  the  other  hand,  in  the  fiscal  year  1910,  a  decrease  of  taxa- 
tion amounting  to  14,419,803  yen  was  carried  out  with  respect 
to  the  land  tax,  business  tax,  succession  tax,  sake  tax,  sugar 
consumption  tax,  shooting  license  fee  and  fees  of  administra- 
tive suits;  and  in  the  fiscal  year  1913  a  reduction  of  7,617,600 
yen  in  the  income  tax  was  carried  out.  Thus,  owing  to  the 
several  changes  which  occurred  after  the  Russo-Japanese 
War,  the  exact  figures  can  not  be  known,  but  the  receipts 
accruing  from  the  increase  of  these  taxes  and  monopolies  are 
roughly  estimated  at  between  138,000,000  yen  and  150,000,000 
yen.  This  was  nearly  the  same  with  the  amount  which  was 
annually  transferred  from  the  general  account  to  the  national 
loans  readjustment  fund.  The  figures  are  shown  in  the  fol- 
lowing table: 

ANNUAL  INCREASE  AND  TRANSFER  OF  TAX  AND  MONOPOLY  RECEIPTS,  1906-1913 


Fiscal  Year 

Increase  Over  1903 

Amount  Transferred  from 
General  Account  to  National 
Loans  Readjustment  Fund 

1906.  . 

Yen 
150,670,000 

Yen 
151,  18-?,  514 

IQO7  .  . 

150,670,000 

I74,'*qo,4.S7 

1908.  . 

161,000,000 

176,839,532 

JQOQ  .  . 

161,000,000 

153,179,792 

IQIO.  . 

ld6,s8i,iQ1> 

IS4.27O.OI2 

1911  

146,580,195 

147,212,558 

IQI2  .  . 

146,580,195 

142,323,811 

IQI-i  .  . 

i^8,862,SQS 

142,919,794 

According  to  this  table  the  receipts  from  the  increased 
taxation  are  apparently  less  than  the  amount  transferred  to 
the  national  loans  readjustment  fund,  giving  the  appearance 
that  the  national  debts  were  redeemed  in  greater  amount  than 
the  increase  of  taxes.  In  point  of  fact,  however,  it  was  not 


136       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

what  it  appeared  to  be,  because  in  the  amount  transferred 
from-  the  general  acount  to  the  national  loans  readjustment 
fund  was  included  the  national  loans  expenditure,  amounting 
to  from  30,000,000  yen  to  40,000,000  yen,  to  meet  the  public 
loans  outside  of  the  war  loan,  especially  the  old  loans.  If  we 
deduct  from  this  transferred  amount  the  redemption  expendi- 
ture for  the  principal  and  interest  of  the  old  loans,  we  know 
that  all  the  remaining  public  loans  expenditures  with  regard 
to  the  Russo-Japanese  War  must  have  been  defrayed  out  of 
this  increased  taxation.  This  was  indeed  a  permanent  inherit- 
ance of  the  war  of  1904  to  1905  in  the  form  of  an  unproduc- 
tive burden  imposed  upon  the  shoulders  of  our  people  over  and 
above  that  of  the  ordinary  armament  outlays. 

EFFECTS  UPON  LOCAL  FINANCE 

During  the  period  extending  from  the  Restoration  to  the 
Satsuma  Rebellion  our  local  finance  was  almost  neglected  on 
account  of  the  constant  straits  in  which  our  national  finance 
was  placed.  In  1875  a  distinction  was  made  between  na- 
tional and  local  taxes,  and  in  1878  a  local  tax  regulation  was 
enacted.  The  form  of  government  then  was  characterized 
by  a  remarkable  centralization  of  power,  and  local  public 
works  were  carried  on  only  to  a  small  extent.  Local  finance, 
therefore,  was  not  worthy  of  any  serious  attention.  By  Law 
No.  i,  1888,  the  Regulations  for  Cities  ("shi"),  Towns  and 
Villages  ("cho"  and  "son"),  respectively,  were  promulgated. 
By  Law  No.  35,  1890,  and  by  Law  No.  36,  1890,  the  Regula- 
tions for  Prefectures  (both  "fu"  and  "ken")  and  the  Regu- 
lation for  the  District  ("gun")  were  promulgated.  By  these 
laws  the  system  of  local  autonomy  was  for  the  first  time  placed 
on  a  firm  basis.  Local  competence  with  regard  to  taxes. and 
loans  was  recognized,  and  thus  local  public  undertakings 
and  local  finances  came  gradually  to  be  developed.  The 
central  power,  however,  remained  as  strong  as  ever,  and  local 
taxes  and  loans  were  subject  to  considerable  restrictions  on 
account  of  the  demands  of  the  central  finance.  At  the  out- 
break of  the  Sino-Japanese  War  the  annual  account  of  the 


EFFECTS   ON   PUBLIC  FINANCE  137 

central  government  witnessed  a  sudden  inflation,  and  the 
need  of  new  resources  was  keenly  felt.  In  consequence,  local 
revenue  was  deprived  of  the  business  tax,  which  was  made  a 
national  tax  in  1896.  During  the  continuance  and  after  the 
termination  of  the  war  the  local  finance  incurred  a  great 
amount  of  expenses  for  schools,  roads,  etc.  In  view  of  these 
expenses  the  restrictions  hitherto  imposed  by  the  central 
government  upon  the  local  taxation  were  on  several  occasions 
greatly  mitigated.  But  the  last  restriction  on  local  taxation 
was  imposed  by  Law  No.  27,  1910, l  which  provided  that  the 
land  surtax  should  not  exceed  53  per  cent  of  the  principal  tax, 
the  business  surtax  should  not  exceed  26  per  cent  of  the  prin- 
cipal tax,  the  income  surtax  should  not  exceed  19  per  cent  of 
the  principal  tax,  and  that  the  taxation  beyond  this  legal 
limit,  and  other  special  local  taxes  should  be  levied  only  with 
the  sanction  of  the  home  and  finance  ministers.  As  for  the 
local  loans,  there  were  no  such  minute  restrictions.  But  with 
regard  to  the  aims  and  methods  of  flotation,  interest  and  the 
method  of  redemption,  the  sanction  of  home  and  finance 
ministers  was  required.  The  only  exceptions  were  the  so- 
called  "Free  Loans,"  in  which  the  sanction  of  the  ministers 
was  not  needed.  Free  loans  included  the  following: 

(1)  City,  town  and  village  loans  which  were  to  remain 
unredeemed  for  three  years  and  then  to  be  redeemed  within 
thirty  years, 

(2)  All  the  local  loans  which  were  to  be  redeemed  within 
three  years, 

(3)  Prefectural  (both  "fu"  and  "ken")  loans  not  exceed- 
ing fifty  thousand  yen  and  district  loans  less  than  one  thousand 
yen. 

In  short  the  flotation  of  any  local  loans,  excepting  those  for 
a  short  time  or  for  a  small  amount,  required  the  sanction  of 
the  central  government.  Moreover,  the  objects  of  the  flota- 
tion of  local  loans  were  restricted  to  the  redemption  of  old 
loans,  to  the  redress  of  disasters  and  calamities,  or  to  public 
works  of  a  permanent  nature.  Moreover,  a  very  strict  con- 

1  Relating  to  the  restoration  of  local  taxation. 


138      WAR  AND  ARMAMENT   LOANS:   ECONOMIC   EFFECTS 

struction  was  placed  upon  these  provisions,  with  the  object  of 
restricting  the  right  of  local  flotation. 

Upon  the  outbreak  of  the  Russo-Japanese  War  in  1904  to 
1905,  the  war  expenditures  were  met  by  an  extraordinary 
special  tax  of  a  huge  amount  and  by  the  domestic  subscription 
of  the  exchequer  bonds.  Local  taxes  and  loans,  therefore, 
were  restricted  as  before.  Causes  arose,  however,  after  the 
war  which  necessitated  the  increase  of  local  loans. 

(1)  One  of  the  causes  was  the  exhaustion  of  resources  for 
the  local  taxes,  due  to  the  continuation  of  the  extraordinary 
special  tax  for  the  readjustment  of  national  debts.     When 
the  extraordinary  special  tax  was  at  first  imposed,  any  further 
imposition  of  local  surtaxes  upon  them  was  prohibited,  in 
order  to  prevent  the  increase  of  local  taxation.     The  national 
enthusiasm  and  prestige  after  the  war  were  accompanied  by 
the  growth  of  local  public  undertakings  which  demanded  a 
relaxation  of  the  restrictions  imposed  upon  local  taxation. 
In  1910  the  imposition  of  local  surtaxes  upon  the  extraordi- 
nary local  taxes  was  at  length  authorized.     As  a  result  of  this 
measure  the  local  taxes  rose  to  the  same  amount  as  the  na- 
tional taxes,  so  far  as  the  direct  taxes  were  concerned.     There- 
after the  public  undertakings  expenditure  which  had  hitherto 
depended  upon  taxation  could  hardly  be  raised  unless  by 
resort  to  the  flotation  of  local  loans. 

(2)  The  second  cause  was  the  expansion  of  public  under- 
takings in  cities,  which  attended  the  rise  of  cities  after  the 
war.     These  public  works  included  water  works,   gas  and 
electric  enterprises,  the  construction  of  roads,  markets  and 
schools,  all  of  which  had  to  rely  upon  public  loans  for  their 
resources.     We  may  also  add  to  this  list  the  increase  of  school 
buildings  on  account  of  compulsory  education,  and  repairing 
expenses  due  to  damages  by  flood. 

(3)  The  third  cause  was  the  introduction  of  a  tremendous 
sum  of  foreign  capital  which  attended  the  flotation  of  foreign 
loans.     At  first  a  greater  part  of  war  expenditures  was  de- 
frayed from  domestic  loans,  such  as  exchequer  bonds  and 


EFFECTS   ON   PUBLIC   FINANCE  139 

extraordinary  military  expenditures  loans.  As  most  of  these 
loans  were  converted  with  proceeds  of  foreign  loans  during 
the  continuance  and  after  the  termination  of  the  hostilities,  a 
great  inflow  of  foreign  capital  ensued.  Money  circulation  in 
the  home  market  became  slack,  and  temporarily  brought 
down  the  rate  of  interest.  This  naturally  paved  the  way  for 
the  flotation  or  conversion  of  local  loans.  Moreover,  local 
loans  hitherto  bore  a  high  rate  of  interest,  and  the  supervising 
central  government  encouraged  their  conversion  into  loans 
of  lower  interest.  Following  the  example  set  by  the  national 
loans,  many  provinces  negotiated  directly  with  foreign  cap- 
italists, and  converted  their  loans  through  the  importation  of 
foreign  capital.  This  is  the  reason  for  the  flotation  and  con- 
stant increase  of  local  foreign  loans  after  the  Russo-Japanese 
War.  There  is  no  doubt  that  the  causes  of  the  increase  of 
the  local  loans  were  by  no  means  limited  to  the  above  three, 
but  it  is  equally  true  that  these  three  were  the  most  important 
ones.  It  was  due  to  these  circumstances  that  postbellum 
local  finances  showed  much  more  remarkable  increase  in  local 
loans  than  in  local  taxes.  Inasmuch  as  the  continuance  of 
extraordinary  taxes  for  the  readjustment  of  national  loans 
and  the  flotation  of  the  large  sum  of  the  foreign  loans  had  a 
great  deal  to  do  with  war  and  armament,  it  is  quite  proper  to 
enumerate  the  increase  of  local  loans  as  one  of  the  influences 
which  the  flotation  and  redemption  of  war  and  armament 
loans  had  upon  local  finances.  And  as  it  is  equally  natural 
that  increase  of  local  loans  should  be  attended  by  increase  of 
local  loans  expenditure  for  the  redemption  and  payment  of 
their  principal  and  interest,  we  may  say  with  propriety  that 
the  most  important  influences  which  national  war  and  arma- 
ment loans  had  upon  local  finances  lay  in  the  increase  of  local 
loans  and  the  local  loans  expenditures.  The  following  table 
is  intended  to  prove  the  above  statement: 


I4O       WAR   AND   ARMAMENT   LOANS:   ECONOMIC   EFFECTS 


(i)  LOCAL  LOANS,  CLASSIFIED  AS  TO  AMOUNTS  FLOATED,  REDEEMED  AND 

OUTSTANDING  l 


Calendar 
Year 

Amount 
Existing  at 
Beginning  of 
Year 

Amount 
Floated 

Amount 
Redeemed 

Amount 
Existing  at 
End  of 
Year 

Amount  of 
Loans  per 
Capita 

I  8qo  .  . 

Yen 

Yen 

Yen 

Yen 

72O  3OI 

Yen 
o  018 

1891  .  . 

2  128  24S 

o  052 

1892  

4  270  6Q2 

o  104 

180-;  . 

o  OQI  801 

o  219 

1804.  . 

IO  O6l  2S3 

o  240 

1895.  - 

TO  200  034 

O  243 

1896  

TO  Sl8  414 

o  246 

1897  . 

l6  3S2  8l4 

o  378 

1898.  .  .  . 

13  738,161 

8  229  O44 

I  7O2  72  S 

2O  264  480 

O  437 

1  899  .  . 

20  264  480 

TO  OS4  772 

2  OQO  QS3 

28  228  299 

o  602 

1900  

28  228  299 

10  084  018 

S82  844* 

37  720  473 

O  703 

IQOI  .  . 

•37  720  4.72 

8  046  336 

2  O55  OO^ 

43  720  806 

I  2QO 

I9O2  .  . 

SI  24O  Q72 

23  057,661 

13  118  278 

61,110,255 

I  .  346 

1903  .  . 

61  140  201 

17  928,320 

1  1  QS6  774 

67  111,747 

I  ,3QO 

1904.  .  . 

6S  6QO  172 

7  846  44O 

8  S44  104 

64  002  so8 

I  .346 

IQOS  .  . 

6s  128  306 

s  462  O3S 

8  O2  1  I  SO 

62  569  l82 

I  2Q3 

1906  

62.47O,q  SS 

21,843,407 

6  729  002 

77,S8S,36o 

I  .606 

1907.  . 

77  S8S  3  SO 

2S  S74  I  S3 

•3  803  307 

89,266,115 

I  .848 

1908.  . 

89  266  115 

IQ  641  77Q 

9  084  270 

00  823  624 

2  .067 

IQOQ  .  . 

00  SO6  O44 

Q4  O78  S67 

30  650  878 

162  033  733 

2  ASQ 

I9IO.  . 

l63,S30.9O2 

12  689,017 

7,766,710 

168,462,200 

2.616 

IQII  .  . 

I7S  Q4S  362 

I  4Q3,676 

2  O26  824 

I7S.4I2.2IS 

2  .  S32 

1912*.  .  .  . 
1913"  — 

183,375,245 
296,252,694 

130,344,077 
23,726,627 

17,817,472 
13,750,700 

295,901,850 
306,228,628 

5.568 
5-656 

a  Fiscal  year. 

The  above  table  shows  the  remarkable  increase  of  local 
loans  after  the  Russo-Japanese  War,  especially  at  the  time 
of  national  loans  readjustment.  Table  2  is  intended  to  show 
what  kind  of  loans  were  most  abundantly  issued. 

This  table  shows  that  municipal  loans  witnessed  an  enor- 
mous increase  after  the  Sino-Japanese  War,  and  more  es- 
pecially after  the  Russo-Japanese  War.  Table  3  is  intended 
to  show  what  undertakings  have  brought  about  this  increase, 
and  whether  domestic  or  foreign  loans  were  resorted  to  for 
their  resources. 

Table  3  shows  that  the  greatest  cause  of  increase  of  local 
loans  in  recent  times  was  the  encouragement  of  industries. 
Next  comes  the  civil  engineering  works  after  the  Sino-Jap- 

1  Based  upon  Reference  Book  Concerning  Monetary  Affairs.  The  disagreement 
of  the  amounts  existing  at  the  beginning  and  at  the  end  of  each  year  is  due  to  the 
fact  that  there  was  some  later  revision  of  figures  in  the  so-called  "Free  Loans." 


EFFECTS   ON   PUBLIC  FINANCE 


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142       WAR   AND   ARMAMENT   LOANS:   ECONOMIC   EFFECTS 


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EFFECTS   ON    PUBLIC   FINANCE 


anese  War,  and  the  readjustment  of  old  loans  after  the  Russo- 
Japanese  War.  The  table  also  shows  that,  as  in  the  case  of 
national  debts,  domestic  loans  were  first  resorted  to,  and  there 
was  a  gradual  increase  of  foreign  loans  after  the  Sino-Japanese 
War,  which  tendency  has  been  intensified  after  the  Russo- 
Japanese  War,  until  in  recent  times  foreign  loans  have  come  to 
exceed  domestic  loans.  The  following  table  shows  that  local 
foreign  loans  were  chiefly  on  account  of  the  expenditures  for 
the  encouragement  of  municipal  industries: 

(4)  LOCAL  FOREIGN  LOANS  RAISED,  REDEEMED  AND  OUTSTANDING1 


Kind 

Date  of 
Sanction 

Annual 
Rate  of 
Interest 

Amount 
Floated 

Amount 
Redeemed 

Amount 
Outstanding 
(End  of  1911) 

Tokyo  city  undertakings  loan  .  . 
Tokyo  city  electric  undertakings 
loan  

July,      1006 
Feb.,      1912 

5% 
5% 

Yen 
14,580,000 

89,564,085 

Yen 

Yen 
14,580,000 

89,564,085 

Kyoto  city  undertakings  loan  .  . 
Kyoto   city   undertakings  loan 
(additional)  

June,      1909 
Dec.,      1911 

5% 

5% 

i7,S5o,ooo 
1,950,000 

17,550,000 
1,950,000 

Osaka  city  harbor  construction 
loan  

Sept.,     1897 

6% 

3,085,000 

34,500 

3,050,000 

Osaka  city  electric  railway  and 
water     works     undertakings 
loan  

April,     1909 

5% 

30,220,000 

30,220,000 

Yokohama  city  water  works  un- 

June       1902 

6% 

900,000 

180,100 

719,900 

Yokohama    city    undertakings 
loan    

Aug.,      1906 

5% 

3,108,800 

3,108,800 

Yokohama     gas     undertakings 
loan  

March,  1909 

6% 

648,000 

114,600 

533,400 

Yokohama    city    water    works 
undertakings  loan    

July,      1909 

5% 

7,000,000 

7,000,000 

Nagoya  city  loan    

May,      1909 

5% 

7,816,000 

7,816,000 

Total   

176  421,885 

329,200 

176,092,685 

The  preceding  tables  have  exhausted  the  statistics  with 
regard  to  the  increase  of  local  loans.  Table  5  is  intended  to 
show  the  increase  of  the  local  loan  expenditures  which  was 
the  natural  consequence  of  the  increase  of  local  loans.  The 
local  loans  expenditure  includes  the  expenditures  for  the  capital 
repayment  and  interest  of  loans  and  other  miscellaneous 
charges;  the  greater  part  of  the  outlay,  however,  is  absorbed 
by  annual  principal  redemption  and  interest  payment. 

This  table  shows  that  local  loans  expenditure  increased 
with  every  war  until  it  occupied  an  important  percentage  of 
provincial  expenditures. 

1  Based  upon  Local  Loan  Statistics. 


144       WAR   AND   ARMAMENT   LOANS:   ECONOMIC   EFFECTS 


CHAPTER   III 
EFFECTS  ON  THE  MONEY  MARKET 

The  flotation  of  any  kind  of  public  loan  has  some  influence 
upon  the  money  market  of  a  country.  In  the  case  of  war  and 
armament  loans,  whether  they  be  funded  or  unfunded,  the  ef- 
fects upon  the  money  market  are  especially  great  and  speedy 
on  account  of  the  amount  and  despatch  of  their  flotation.  The 
effects  extend  over  manifold  fields,  but  especially  noteworthy 
are  the  changes  brought  about  in  the  banking  system,  coinage 
system,  currency,  prices  of  commodities,  bank  rate  of  interest, 
amount  of  specie  and  various  modifications  brought  about  in 
the  municipal  and  rural  money  markets.  Each  of  these  will 
be  treated  in  the  following  sections. 

EFFECTS  ON  THE  BANKING  SYSTEM 

The  primary  effect  upon  the  banking  system  of  the  redemp- 
tion of  government  paper  moneys  issued  on  account  of  the  Res- 
toration and  that  of  the  utilization  of  public  bonds  was  the  es- 
tablishment of  national  banks  after  1872.  At  the  beginning 
of  the  Restoration  the  so-called  "Exchange  Company"  was 
the  only  commercial  organ  of  monetary  circulation.  More- 
over, on  account  of  the  imperfect  organization  of  these 
companies,  bankruptcies  occurred  in  rapid  succession.  Such 
having  been  the  case,  an  organ  of  monetary  circulation  suit- 
able both  for  the  government  and  the  people  was  what  was 
then  keenly  needed.  Had  this  been  the  only  defect,  the  estab- 
lishment of  an  ordinary  commercial  bank  would  have  complied 
sufficiently  with  the  needs  of  the  times.  The  circumstances 
of  the  time,  however,  were  very  complex.  The  inconvertible 
paper  money  issued  by  the  government  during  the  period  ex- 
tending from  1868  to  1872  for  the  pacification  of  the  disturb- 
ances or  for  supplementing  the  deficits  of  the  annual  revenue 
reached  the  tremendous  amount  of  over  80,000,000  yen,  and 
»  145 


146       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

continued  to  increase.  Unless,  therefore,  a  measure  for  its  re- 
demption were  to  be  speedily  taken,  there  was  no  telling  what 
financial  and  commercial  crisis  might  be  in  store.  Upon  the 
return  from  America  of  Hirobumi  I  to,  an  official  of  the  Finance 
Department,  the  government  adopted  his  proposal  for  the  es- 
tablishment of  national  banks,  which  was  chiefly  based  upon 
the  system  of  national  banks  in  the  United  States,  including  a 
partial  adoption  of  the  American  bank  note  system.  The  na- 
tional banks  were  to  be  authorized  to  issue  convertible  bank 
notes.  The  National  Bank  Regulation  was  promulgated  by 
Notification  No.  349,  November,  1872.  The  most  important 
points  of  this  regulation  were  as  follows: 

To  found  the  national  banks  and  to  cause  60  per  cent  of  the 
capital  to  be  paid  to  the  government  in  government  paper 
money,  for  which  the  government  was  to  deliver  to  the  banks 
"Kinsatsu"  exchange  loan  bonds  issued  for  the  redemption  of 
government  paper  money.  On  the  security  of  these  loan 
bonds,  bank  notes  of  the  same  amount  were  authorized  to  be 
issued  which  the  banks  were  required  to  convert  into  coins  on 
demand.  The  aim  and  object  of  the  regulation  was  to  redeem 
the  inconvertible  paper  money  and  to  bring  about  a  smooth 
circulation  of  currency.  In  anticipation  of  the  applications 
for  charters,  the  government  manufactured  bank  notes 
amounting  to  15,000,000  yen  to  be  delivered  in  exchange  for 
public  bonds.  There  were,  however,  only  a  few  banks  which 
opened  business  in  accordance  with  that  regulation.  The  rea- 
son was  simply  this:  From  about  1874  there  had  been  a  con- 
stant outflow  of  specie,  and  the  value  of  paper  money  under- 
went daily  depreciation.  If  the  national  banks  issued  bank 
notes,  specie  conversion  would  immediately  be  demanded,  and 
the  bank  notes  would  at  once  return  to  the  bank.  The  bank 
received  from  the  government  only  6  per  cent  interest  for  the 
public  bonds  corresponding  to  6  per  cent  of  the  capital,  but  no 
profit  could  be  derived  from  bank  notes.  The  already  estab- 
lished banks  experienced  more  and  more  difficulty  in  carry- 
ing on  their  business.  At  this  juncture  the  government,  with 
a  view  to  disposing  of  the  hereditary  pension  system,  issued 


EFFECTS   ON   THE   MONEY   MARKET  147 

hereditary  pension  bonds  which,  at  length,  reached  the  im- 
mense sum  of  174,000,000  yen.  Consequently  their  quota- 
tions daily  suffered  depreciation,  throwing  the  nobles  and 
"Samurai"  class  holding  these  bonds  into  an  indescribable 
state  of  embarrassment.  An  urgent  measure  for  their  relief 
was  needed.  The  government,  therefore,  authorized  the  em- 
ployment of  these  bonds  as  security  for  the  issue  of  bank  notes, 
made  much  more  liberal  the  conditions  imposed  on  the  issue  of 
the  bank  notes,  and  enlarged  the  limitations  hitherto  put  upon 
the  "Kinsatsu"  exchange  bonds.  By  proclamation  dated 
August  i,  1876, :  the  government  made  less  vigorous  the  pro- 
visions regarding  their  exchange  reserves.  By  this  revised 
regulation  the  national  banks  were  to  deposit  as  security  with 
the  government  public  bonds  to  the  amount  corresponding  to 
eight-tenths  of  their  capital,  for  which  bank  notes  of  the  same 
amount  were  to  be  printed  by  the  government  and  issued  by 
the  banks,  providing  the  exchange  reserve  with  any  kind  of 
currency  amounting  to  one-fourth  of  circulation.  Thus  the 
national  banks  were  relieved  from  the  restrictions  concerning 
the  issue  of  the  bank  notes,  and  could  hold  public  bonds  at 
large.  On  the  other  hand,  the  system  of  specie  exchange, 
which  had  formed  one  of  the  stumbling  blocks  to  the  circula- 
tion of  paper  money,  was  mitigated,  and  exchange  with  gov- 
ernment paper  money  was  permitted,  provided  it  was  used  as 
currency.  This  was  undoubtedly  not  conducive  to  the  speedy 
redemption  of  inconvertible  paper  money,  but  there  was  no 
alternative  for  the  government  to  take. 

Moreover,  to  hold  public  bonds  was  equal  to  possessing 
them  as  security  reserve  for  inconvertible  paper  money,  which 
in  turn  proved  to  be  a  preliminary  step  in  the  redemption  of 
inconvertible  paper  money.  Be  that  as  it  may,  this  revised 
regulation  was  very  favorable  to  the  national  banks,  and  the 
holders  of  the  hereditary  pension  bonds  applied  for  the  estab- 
lishment of  one  bank  after  another.  The  Fifteenth  National 
Bank  was  the  largest  of  its  kind. 

The  relation  between  the  war  loans  with  regard  to  the  Sat- 

1  Regulation  concerning  new  national  banks. 


148       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

suma  Rebellion  and  the  banking  system  is  fully  exemplified  in 
the  establishment  of  the  Fifteenth  National  Bank.  The  said 
bank  was  a  great  institution  with  an  authorized  capital  of  17,- 
800,000  yen,  which  had  been  founded  in  1877  with  the  object  of 
meeting  the  government  floating  debts  contracted  in  connec- 
tion with  the  Satsuma  Rebellion,  by  combining  hereditary 
pension  bonds  possessed  by  nobles.  As  the  said  bank  loaned 
the  government  bank  notes  corresponding  to  its  actual  capital 
15,000,000  yen,  the  government  conferred  in  exchange  great 
privileges  upon  the  said  bank.  It  enjoyed,  therefore,  great  in- 
fluence in  the  center  of  the  metropolis  which  greatly  attracted 
the  attention  of  the  public.  Thereafter,  the  enthusiasm  for 
founding  national  banks  sprang  up  throughout  the  whole  Em- 
pire, and  their  number  increased  day  by  day. 

On  the  authority  of  Financial  History  of  the  Meiji  Era,  the 
number  of  national  banks  in  1876  was  only  five,  with  a  total 
capital  of  2,500,000  yen,  and  with  an  issue  of  paper  money  of 
not  more  than  2,040,000  yen.  In  1877  there  were  twenty- 
three  newly  authorized  banks,  with  a  total  capital  of  20,550,000 
yen,  and  with  an  issue  of  paper  money  amounting  to  18,144,880 
yen.  In  1878  there  were  ninety-eight  newly  authorized  banks 
with  a  total  capital  figuring  12,185,000  yen,  and  with  an  issue 
amounting  to  9,300,000  yen.  In  1879  twenty-seven  banks, 
with  a  total  capital  of  2,655,0003^,  and  with  an  issue  of  1 ,964,- 
ooo  yen,  were  newly  chartered.  Thus  the  number  of  national 
banks  rose  to  103  in  a  brief  space  of  time.  Through  the  in- 
crease of  capital  of  each  bank  after  its  foundation,  the  whole 
amount  of  paper  money  issued  ultimately  exceeded  34,430,000 
yen,  which  was  the  limit  set  by  the  government.  The  govern- 
ment, therefore,  forbade  any  more  chartering  of  new  national 
banks.  The  business  of  the  national  banks  was  thus  put  on  a 
firmer  basis  and  enjoyed  high  prosperity,  as  can  be  seen  by  the 
table  inserted  elsewhere.  In  consequence  of  the  adoption  of  a 
uniform  convertible  notes  system  in  1882,  by  the  promulgation 
of  Bank  of  Japan  Regulation,  the  National  Bank  Regulation 
was  also  revised  in  May,  1883.  Through  this  revision  the  na- 
tional banks  were  deprived  of  their  privilege  of  issuing  paper 


EFFECTS    ON    THE   MONEY   MARKET  149 

money,  and  the  term  of  their  continuance  as  national  banks  was 
limited  to  twenty  years,  counting  from  the  day  of  their  respec- 
tive establishments;  and  at  the  expiration  of  the  terms  each 
bank  was  ordered  to  complete  the  redemption  of  the  already 
issued  paper  money.  Further,  it  was  left  to  the  discretion  of 
each  bank  whether  or  not  it  would  continue  its  existence  as  an 
ordinary  bank.  The  redemption  of  the  already  issued  paper 
money  was  to  be  accomplished  by  purchase  of  public  bonds 
with  the  reserve  fund,  which  had  been  hoarded  at  each  bank, 
the  public  bonds  being  required  to  be  accumulated,  until  the 
expiration  of  the  continuance  of  the  banks,  as  a  fund  for  the 
redemption  of  paper  money.  This  was  called  the  Redemp- 
tion Fund,  Class  I.  Further,  an  amount  corresponding  to  2.5 
per  cent  per  annum,  or  1.25  per  cent  per  half  year,  against  the 
issued  paper  money  was  to  be  deducted  from  the  profit  of  every 
business  year,  which  sum  was  to  be  deposited  in  the  Bank  of 
Japan.  The  Bank  of  Japan  was  then  to  purchase  public  bonds 
with  money  deposited  by  the  banks.  These  bonds,  together 
with  interest  on  them,  were  to  form  the  fund  for  the  redemp- 
tion of  paper  money.  This  was  called  the  Redemption  Fund, 
Class  2.  The  above  two  redemption  funds  were  all  deposited 
in  the  Bank  of  Japan,  through  the  agency  of  which  the  paper 
money  of  all  the  national  banks  was  redeemed.  This  was 
called  the  method  of  collective  redemption.  By  a  law  of 
March,  1896,  the  expiration  of  the  term  of  business  was  post- 
poned to  February,  1899,  the  term  of  circulation  for  the  bank 
notes  was  fixed  to  terminate  on  December  9, 1899,  and  the  term 
for  their  exchange  was  fixed  at  five  full  years  counting  from 
the  termination  of  circulation. 

The  establishment  of  the  Bank  of  Japan  had  something  to 
do  with  the  redemption  of  paper  money.  Over  one  hundred 
and  fifty  national  banks  had  been  scattered  all  over  the  coun- 
try, controlling  each  locality,  but  there  was  no  central  banking 
institution.  Each  bank  acted  in  its  own  sphere  of  influence, 
and  concerted  action  of  all  the  banks  in  adaptation  to  the  cir- 
cumstances of  the  domestic  and  foreign  markets  was  impossible. 
The  desirability  of  the  establishment  of  such  a  central  bank, 


150       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

therefore,  had  already  attracted  the  general  attention  of  the 
business  world.  One  thing,  however,  remained  which  re- 
quired immediate  attention.  The  government  inconvertible 
paper  money  which  had  witnessed  a  sudden  increase  after  the 
Satsuma  Rebellion,  together  with  the  bank  notes  which  had 
then  been  issued  from  various  national  banks,  brought  down 
the  quotations  of  public  loans  and  paper  money.  This,  in 
turn,  occasioned  an  advance  of  prices  and  money  interest,  ac- 
companied by  increasing  efflux  of  specie.  Such  circumstances 
were  the  most  important  cause  of  the  establishment  of  the 
Bank  of  Japan.  The  establishment  of  this  bank  had  in  view 
the  following  three  important  missions  with  regard  to  the  re- 
demption of  paper  money.  The  first  was  as  an  organ  of  unify- 
ing convertible  notes  by  exchanging  the  government  paper 
money  into  convertible  notes.  The  second  was  to  advance  to 
the  government  a  fund  for  the  paper  money  redemption,  that 
the  latter  might  directly  redeem  its  own  paper  money.  The 
third  was  as  agent  for  the  collective  redemption. 

The  Bank  of  Japan  was  organized  by  Notification  No.  35, 
June,  1882  (Bank  of  Japan  Regulation)  with  a  capital  of  10,- 
000,000  yen.  By  Article  14  of  the  same  regulation,  the  Bank 
of  Japan  was  authorized  to  issue  convertible  bank  notes.  The 
issue  of  convertible  notes  commenced  on  May  9,  1885,  in  ac- 
cordance with  Notification  No.  18,  May,  I884.1  The  main 
points  of  the  regulation  were  as  follows: 

1 i )  The  convertible  bank  notes  shall  be  issued  by  the  Bank 
of  Japan  in  accordance  with  Article  14  of  the  Bank  of  Japan 
Regulation  and  shall  be  convertible  into  silver  coins  (Art.  i). 

(2)  The  Bank  of  Japan  shall  hold  as  an  exchange  reserve  a 
reasonable  amount  of  silver  coins  against  the  convertible  bank 
notes  issued  (Art.  2). 

(3)  The  convertible  bank  notes  shall  be  available,  without 
any  hindrance,  for  taxes,  customs  duties  and  all  other  trans- 
actions (Art.  4). 

(4)  The  Bank  of  Japan  shall  on  demand  convert  the  con- 
vertible bank  notes  at  any  time  during  business  hours  at  its 
main  and  branch  offices  (Art.  6). 

1  Convertible  Bank  Notes  Regulation. 


EFFECTS   ON   THE   MONEY   MARKET  151 

In  accordance  with  Notification  No.  14,  June,  1885,  the  con- 
version was  commenced  by  disbursing  specie  (silver  coins)  out 
of  the  reserve  fund,  on  and  after  January  i,  1886,  and  thus  the 
conversion  system  was  firmly  established.  This  system  of 
conversion,  together  with  the  method  of  collective  redemption, 
greatly  reduced  the  amount  of  government  and  bank  paper 
money.  In  1888  the  figures  were  still  as  follows: 

Yen 

1.  Government  paper  money 52,115,148 

Standard  paper  money .  .  .      .       43,667,436 

Subsidiary  paper  money          ...          8,447,712 

2.  Bank  paper  money 27,000,000 

Against  this  sum  the  remainder  of  the  reserve  fund  which 
the  government  had  accumulated  was  only  21,667,436  yen. 

Some  measure  was  necessary  to  cover  this  shortage  of  22,- 
000,000  yen.  As  for  the  subsidiary  paper  money,  it  could  be 
exchanged  for  subsidiary  silver  coin.  As  for  the  bank  notes, 
their  gradual  retirement  by  means  of  collective  redemption 
had  already  been  decided  upon.  But  with  regard  to  converti- 
ble notes,  which  were  to  be  issued  in  exchange  for  them,  it  was 
impossible  to  provide  enough  specie  reserve  for  their  con- 
version. Unless,  however,  some  new  restrictions  were  to  be 
imposed,  it  could  not  but  help  on  the  tendency  to  currency  in- 
flation. By  Imperial  Ordinance  No.  59,  July  31,  1888,  the 
government  made  the  following  amendment  to  the  Converti- 
ble Bank  Note  Regulation. 

Article  2  provides  against  the  issue  of  the  convertible  notes ; 
the  Bank  of  Japan  shall  provide  the  same  amount  of  gold  and 
silver  coins,  or  bullion. 

The  Bank  of  Japan  shall,  aside  from  the  preceding  clause,  be 
authorized  to  issue  convertible  notes  to  the  limit  of  70,000,000 
yen  on  the  security  of  government  bonds,  Treasury  bills  and 
other  reliable  bonds  or  commercial  bills,  but  27,000,000  yen 
out  of  the  70,000,000  yen  under  this  clause  shall  be  gradually 
issued  to  the  extent  of  the  amount  of  redemption  of  the  paper 
money  issued  by  the  national  banks  on  and  after  January  I, 
1889. 

In  case  the  Bank  of  Japan  considers  that  the  condition  of  the 
market  requires  the  increase  of  current  money,  the  said  bank 


152       WAR   AND    ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

shall  be  authorized  to  issue,  with  the  permission  of  the  Finance 
Minister,  convertible  bank  notes  over  and  above  the  issue 
of  the  two  preceding  clauses  on  the  security  of  government 
bonds,  Treasury  bills,  and  other  reliable  bills  or  commercial 
paper.  In  such  cases  the  bank  shall  pay  a  circulation  tax  not 
lower  than  5  per  cent  annum,  the  precise  figures  being  decided 
by  the  Finance  Minister  from  time  to  time.  The  Bank  of 
Japan  shall  loan  the  government  an  amount  not  exceeding 
22, 000,000  yen  for  the  redemption  of  government  paper  money, 
with  interest  at  2  per  cent  per  annum,  provided  that  it  shall 
bear  no  interest  after  1898. 

The  term  and  the  annual  amount  of  repayment  of  the  loan 
provided  for  in  the  preceding  section,  shall  be  fixed  by  the 
Finance  Minister. 

By  Law  No.  34,  May,  1890,  the  limit  of  the  issue  on  the  se- 
curity reserve  was  raised  to  85,000,000  yen,  and  at  the  same 
time  the  interest  on  22,000,000  yen,  which  was  the  amount 
loaned  for  the  redemption  of  government  paper  money,  was 
dropped. 

By  this  revision  the  convertible  notes  were  able  to  fulfill  the 
currency  demand  and  yet  not  exceed  it.  They  also  could  su- 
persede the  remaining  government  and  bank  paper  money. 
To  accomplish  this  purpose  the  Bank  of  Japan  was  granted  the 
privilege  of  the  fiduciary  note  issue,  though  the  bank  was  or- 
dered to  loan  the  government  22,000,000  yen  at  a  low  rate  of 
interest.  The  government  added  this  sum  to  the  reserve  fund, 
in  order  to  drive  from  circulation  the  government  paper  money. 
We  have  already  referred  to  this  loan  as  the  loan  for  paper 
money  redemption.  This  was  undoubtedly  one  of  the  most 
remarkable  influences  which  the  redemption  of  government 
paper  money  had  upon  the  system  of  the  Bank  of 
Japan. 

During  the  Sino-Japanese  War  and  Russo-Japanese  War, 
the  Bank  of  Japan  often  complied  with  the  needs  of  tempo- 
rary loans  for  war  and  armament,  and  continued  to  issue  con- 
vertible notes  beyond  the  legal  limit.  Moreover,  by  a  law  of 
1899,  revision  was  made  of  the  system  of  security  reserve, 


EFFECTS   ON   THE   MONEY   MARKET  153 

raising  its  limits  to  120,000,000  yen.  Subsequent  to  the  Russo- 
Japanese  War  a  big  amount  of  government  loans  had  to  be 
contracted  on  account  of  the  government  temporary  loans, 
war  loans  and  their  conversion,  whereby  the  issue  beyond  the 
legal  limit  became  so  much  the  greater. 

The  establishment  of.  the  Yokohama  Specie  Bank  had  a  great 
deal  to  do  with  the  redemption  of  inconvertible  notes.  The 
revision  of  the  National  Bank  Regulation  in  1876,  together 
with  the  issue  of  hereditary  pension  bonds,  gave  rise  to  the 
tendency  toward  establishment  of  banks,  and  thus,  in  1879, 
the  monetary  organs  for  domestic  commerce  became  substan- 
tially adequate.  With  regard  to  foreign  monetary  organs, 
however,  there  were  only  two  or  three  branch  offices  of  foreign 
banks,  which  state  of  things  caused  great  inconveniences  and 
disadvantages  to  our  foreign  trade.  Just  then  the  increase  of 
the  circulation  of  paper  currency  brought  about  no  small  dif- 
ference between  silver  and  paper  currency.  As  a  result  of  this, 
an  immense  amount  of  metal  flowed  out  of  the  country,  and 
circulation  of  gold  and  silver  within  the  home  market  remark- 
ably decreased.  Public  bonds  and  paper  money  continued  to 
depreciate.  Such  circumstances  could  not  but  have  remark- 
able effects  upon  foreign  commerce  and  domestic  finance.  The 
establishment  of  an  organ  with  the  double  object  of  assisting 
money  circulation  and  of  maintaining  and  regaining  specie 
was  what  was  most  needed  at  the  juncture.  Accordingly,  in 
1879,  on  the  proposal  of  the  Finance  Minister,  a  foreign  silver 
exchange  was  established  with  the  object  of  facilitating  the 
sale  of  silver  and  of  arresting  the  rise  of  its  value.  The  root  of 
the  malady,  however,  lay  in  the  superabundance  of  paper  cur- 
rency. Therefore,  without  readjusting  paper  money,  there 
was  but  slender  hope  of  effecting  a  cure.  In  order  to  readjust 
paper  money  the  regulation  of  specie  was  necessary.  There- 
upon, in  accordance  with  National  Bank  Regulation  of  Feb- 
ruary 23,  1880,  the  establishment  of  the  Yokohama  Specie 
Bank  was  authorized,  which  opened  for  business  on  the  28th  of 
the  same  month.  By  Imperial  Ordinance  No.  29,  July,  1887, 
the  Yokohama  Specie  Bank  Regulation  was  promulgated. 


154       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

At  first  its  capital  was  3,000,000  yen,  one-third  (1,000,000  yen) 
being  contributed  by  the  government  in  silver  coins.  More- 
over, the  government  deposited  with  the  said  bank,  out  of  the 
reserve  fund  of  the  national  Treasury,  a  foreign  documentary 
bill  fund  in  order  to  encourage  direct  foreign  exportation  and 
also  to  regain  specie,  and  ordered  the  bank  to  do  documen- 
tary bill  business.  After  the  Yokohama  Specie  Bank  Regula- 
tion was  promulgated,  the  organization  of  the  bank  underwent 
a  change,  and  its  capital  was  increased  to  6,000,000  yen.  At 
the  same  time,  the  government  ordered  the  bank  to  manage 
government  money,  public  loans  and  government  exchange  at 
home  and  abroad,  and  also  to  extend  accommodation  in  mat- 
ters of  government  finance.  On  the  abolition  of  the  foreign 
exchange  fund  system  in  1889  the  government  ordered  the 
Bank  of  Japan  to  enter  into  a  special  agreement  with  the  Specie 
Bank  to  the  effect  that  the  former  bank  should,  at  the  low  in- 
terest of  two  per  cent  per  annum,  rediscount  the  foreign  bills 
of  exchange  held  by  the  latter  bank.  Thus,  the  Yokohama 
Specie  Bank,  in  collaboration  with  the  Bank  of  Japan,'  as- 
sumed the  mission  of  export  trade  encouragement  and  specie 
absorption.  The  above  business  can  not  be  explained  merely 
from  the  fact  that  the  Yokohama  Specie  Bank  served  as  a 
monetary  organ  in  foreign  trade.  It  served  also  as  a  financial 
organ  for  the  maintenance  and  absorption  of  specie  and  for  the 
facilitation  of  the  payment  of  the  principal  and  interest  of  pub- 
lic bonds.  For  instance,  in  March,  1886,  this  bank  was  or- 
dered to  manage  the  lottery,  the  repayment  and  payment  of 
the  principal  and  interest  of  the  7  per  cent  foreign  loan  (which 
had  been  floated  for  the  disposal  of  the  hereditary  pension 
system),  and  the  business  of  public  loans.  The  number  of 
occasions  on  which  the  bank  transacted  business  relating  to  for- 
eign countries  during  the  Sino-Japanese  and  the  Russo-Japa- 
nese Wars  with  regard  to  war  and  armament  loans  defies  enu- 
meration. In  1900  its  capital  was  increased  to  18,000,000  yen, 
and  its  business  witnessed  a  remarkable  development.  The 
effects  of  war  and  armament  loans  upon  private  banks  were 
not  direct  ones.  Prior  to  the  establishment  of  national  banks 


EFFECTS   ON   THE   MONEY   MARKET  155 

there  had  existed  exchange  companies,  and  similar  monetary 
companies,  which  partook  of  the  nature  of  private  banks, 
though  the  privilege  of  paper  money  issue  had  been  conferred 
upon  them.  By  the  promulgation  of  the  National  Bank  Reg- 
ulation in  1872,  this  privilege  was  taken  away  from  those  com- 
panies, and  the  use  of  the  name  of  banks  was  also  prohibited. 
In  1896,  with  a  revision  in  the  above  regulation,  ordinary  pri- 
vate monetary  companies  were  authorized  to  use  the  name  of 
banks,  and  thus  private  banks  came  gradually  to  increase.  In 
1879  the  establishment  of  national  banks  was  forbidden  on  ac- 
count of  the  already  superabundant  number.  Consequently, 
private  banks  greatly  increased.  Further,  by  the  revision  of 
the  National  Bank  Regulation  in  May,  1883,  the  privilege  of 
issuing  paper  currency  was  taken  away  from  the  national 
banks,  and  after  the  expiration  of  the  period  fixed  the 
national  banks  were  allowed  to  continue  their  business  as 
private  banks.  Consequently  the  national  banks  gradually  re- 
deemed the  bank  notes  and  changed  themselves  into  private 
banks,  which  contributed  in  a  great  measure  to  the  develop- 
ment of  private  banks.  The  development  of  private  banks, 
therefore,  had  a  great  deal  to  do  with  the  government  paper 
money,  inasmuch  as  the  disposal  of  national  banks  brought 
about  the  development  of  private  banks.  Indirectly,  the  read- 
justment of  war  loans  had  no  small  effect  upon  the  growth  of 
private  banks. 

Moreover,  the  private  banks  which  had  taken  the  place  of 
national  banks  fell  under  a  special  law  from  July  I,  1893,  in 
accordance  with  Law  No.  72,  August,  iSgo,1  and  Law  No.  73, 
August,  1890.2  Once  developed  as  an  integrated  system,  they 
assumed  the  responsibility  of  collecting  and  distributing  funds 
for  the  flotation,  conversion  and  redemption  of  public  loans, 
which  had  increased  with  each  war.  It  was  also  not  infre- 
quent that  they  successfully  carried  on  their  business  by  re- 
ceiving the  deposits  of  the  government  and  public  bodies.3 
Lastly,  the  flotation  and  redemption  of  public  loans  had  great 

1  Bank  Regulation.  3  Cf.  table,  p.  156. 

2  Savings  Bank  Regulation. 


156       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 


influence  upon  the  money  market  of  the  country,  inasmuch  as 
it  brought  about  the  centralization  of  the  fund.  The  bank- 
ing system  was  centralized,  and  even  ordinary  banks  showed 
a  strong  tendency  towards  amalgamation  and  concentration. 
The  explanation  is  to  be  sought  in  the  fact  that  the  develop- 
ment of  banking  business  decreased  the  number  of  main  offices, 
while  it  increased  their  branches  and  detached  offices.  The 
capital  stock  of  each  bank  on  the  average  increased  year  after 
year  especially  after  great  wars.1  To  sum  up  the  relation  be- 
tween war  and  armament  loans  on  one  hand  and  private  banks 

(i)  DEVELOPMENT  OF  NATIONAL  BANKS2 


Calendar 
Year 

Number 
of  Banks 

Paid-up 
Capital 

Reserve 
Fund 

Deposits 
Outstanding 

Circulation 
of  Bank 
Paper  Money 

Net  Profit  of 
Every  Latter 
Half  Year 

1873  

2 

Yen 

Yen 

Yen 
2  867  437 

Yen 
1,362,210 

Yen 
93  551 

1874  

4 

3,432,000 

29,253 

3,491  637 

1,995,000 

194,011 

1875  

1876  

5 

2,350  ooo 

8  1  599 

1,744,000 

227,275 

1877   .  . 

26 

1878  

95 

378  484 

26  279  003 

2  1  1  8  440 

1879  

151 

40,616  063 

971,817 

16  226  511 

34,046,006 

3,073,378 

1880   .  .  . 

1881  

148 

43  886  100 

34  396,818 

5  851,262 

1882  

143 

44,206,100 

3,839,362 

19  714,942 

34,385,345 

3,887,509 

1883 

34  275  736 

3  163  631 

1884  

140 

4,677  473 

31  015,942 

3  090,030 

1885  

139 

44,456,100 

5,130,210 

27,476,921 

30,155,389 

3,047,740 

1886  .  ... 

136 

5  488  659 

3  792  232 

1887  

136 

45,838  851 

6,019  654 

28  604,133 

3,419,281 

1888  

135 

46,877,639 

7,750,523 

35,585,228 

27,679,655 

3,899,198 

1889  

47  68  1  380 

26  739,205 

3  888  163 

1890  

134 

48,644  662 

12,461  455 

33  598  116 

25  810,720 

3,721,919 

1891  

134 

48,701,100 

13,730,893 

40,214,394 

24,869,508 

4,091,295 

1892  

23  890  509 

3  662  082 

1893  

133 

48,416,100 

1  6  071,768 

59  833  610 

22  756,119 

3  730,779 

1894  

133 

48,816,100 

17,634,647 

66,977,141 

21,781,797 

4,509,765 

1895  

133 

20  796,786 

4  447,803 

1896  

121 

44,761,770 

61  825  619 

16,497,889 

7,563,528 

1897  

58 

13,630,000 

6,057,020 

27,766,196 

5,024,729 

1,447,198 

1898  

4 

390,000 

91,715 

745,077 

1,866,563 

98,014 

1899"  
1900  
1901  

974.999 
483,933 
449,321 

1902  

43L576 

»  Expiration  of  the  term  of  business. 

1  Cf .  table  above. 

2  Based  on  the  Financial  History  of  the  Meiji  Era.     It  is  mentioned  in  the  author- 
ity that  though  the  total  amount  of  bank  paper  money  delivered  is  estimated 
at  35,136,860  yen,  the  amount  disbursed  by  collective  redemption  amounted  to 
35,687,256  yen. 


EFFECTS    ON    THE   MONEY   MARKET 


157 


on  the  other:  the  former  had  indirect  effects  upon  the  latter, 

(1)  in  the  establishment,  (2)  in  the  carrying  on  of  their  busi- 
ness, and  (3)  on  the  scale  of  their  business.     In  illustration  of 
the  above  statement,  the  statistics  respecting  the  development 
of  the  national  banks,  Bank  of  Japan,  Specie  Bank,  private 
banks  and   all   the  banks  of  the  Empire  are  given  in  the 
preceding  and  following  tables. 

(2)  AMOUNT  OF  BANK  OF  JAPAN  CONVERTIBLE  NOTES  AND  GOVERNMENT  LOANS' 


Calendar 
Year 

Issue  of 
Convertible 
Notes 

Specie 
Reserve 

Security 
Reserve 

Issue  Be- 
yond the 
Legal  Limit 

Government 
Temporary 
Loans 

Yen 

Yen 

Yen 

Yen 

Yen 

1885 

(May) 

2,645,440 

2,806,883 

12,000,000 

1885.... 

3,653,272 

3,008,572 

644,700 

15,066,205 

1886  

39.976,365 

24,066,787 

15,694,577 

36,882,892 

1887.  ... 

53,469,092 

31,594,193 

21,874,898 

36,790,808 

1888  

65,822,252 

45,074,543 

20,747,709 

23,081,755 

1889.  .  .  . 

79,108,652 

57,409,299 

21,699,353 

10,271,243 

1890.  .  .  . 

102,931,766 

44,622,413 

58,309,353 

32,000,000 

1891  .... 

115,734,545 

63,178,333 

52,556,212 

32,000,000 

1892.  .  .  . 

125,843,363 

81,158,265 

44,685,098 

32,000,000 

1893.... 

148,663,128 

85,928,516 

62,734,612 

32,000,000 

1894.  .  .. 

149,813,700 

81,718,291 

68,095  409 

51,530000 

1895.... 

180,336,815 

60,370,797 

119,966,018 

34,966,018 

71,500,000 

1896.  .  .  . 

198,313,896 

132,730,192 

65.583,704 

76,000,000 

1897.... 

226,229,058 

98,261,473 

127,967,585 

42,967,585 

28,831,132 

1898  

199,399,901 

89,570,239 

107,829,662 

22,829,662 

22,000,000 

1899  

250,562,040 

110,142,169 

140,419,871 

20,419,871 

24,500,000 

1900.  .  .  . 

228,570,032 

67,349,129 

161,220,903 

41,220,903 

40,200,000 

1901  .... 

214,096,766 

71,358,371 

142,738,395 

22,738,395 

77,200,000 

1902  .... 

232,094,377 

109,118,817 

122,975,560 

2,975,56o 

76,850,000 

1903  .... 

232,920,563 

116,962,184 

115,958,379 

56,849,200 

1904.  .  .  . 

286,625,752 

83,581,226 

203,044,526 

83,044,526 

154,849,200 

1905.  .  .  . 

312,790,819 

25,595,026 

197,195,793 

77,195,793 

178,624,200 

1906  .... 

341,766,164 

147,202,125 

194,564,039 

74,564,039 

134,695,333 

1907.  .  . 

369,984,111 

161,742,132 

208,241,980 

88,241,980 

78,482,157 

1908  .  .  . 

352,734,272 

169,504,514 

183,229,758 

63,229,758 

75,753,603 

1909.  .  . 

352,763,201 

217,843,275 

134,919,926 

14,919,926 

99,508,649 

1910.  .  . 

401,624,928 

222,382,465 

179,242,463 

59,242,463 

147,390,292 

1911  .  .  . 

433,399,n6 

229,154,220 

204,244,896 

84,244,896 

205,591,202 

1912.  .  . 

448,921,708 

247,023,380 

201,898,326 

81,898,326 

154,513-877 

1913.  .  . 

426,388.708 

224,365,880 

202,022,828 

82,022,828 

127,672,664 

1  Based  on  the  Financial  History  of  the  Meiji  Era,  Materials  for  Reference  with 
Regard  to  Tokyo  Clearing  House,  and  the  Specie  Investigation.  Government  loans 
include  Treasury  bills  and  various  temporary  loans. 


158       WAR   AND   ARMAMENT   LOANS:    ECONOMIC   EFFECTS 
DEVELOPMENT  OF  PRIVATE  BANKS  AND  SIMILAR  COMPANIES1 


Calendar  Year 

Number 

Capital 

Deposits  Outstanding 
at  End  of  Each  Year 

1884  

OSS 

Yen 
^4.  672  7'?'; 

Yen 
Unknown 

1885. 

06^ 

•*4,IQO  182 

1886    . 

Q6Q 

33.36O  T.2Q 

ii 

1887. 

Q62 

•z.4  OI"?  7^6 

n 

1888. 

Q4-I 

-22.77Q  6SO 

Id.  S27  00^ 

1889.  . 

oso 

^6,4.80.070 

18  288  497 

1890 

Q74- 

4O  08  "I  701 

2s!  1^7  Q78 

1891    . 

Q72 

40,988  209 

24  60^  4QS 

1892    .                          .    . 

LOOT 

42  262  619 

•5-j  2^8  68s 

DEVELOPMENT  OF  ALL  BANKS  OF  THE  EMPIRE2 


Calendar  Year 

Number 
of  Banks 

Paid-up 
Capital 

Deposits  Outstanding 
at  End  of  Each  Year 

189-;.  . 

663 

Yen 
62,916,100 

Yen 
1  07,  063,  ^06 

l8Q4..    - 

862 

101,  379,881 

'    l^8.o6s.7S2 

1895 

I,OI2 

127,695,210 

1  0  1  ,  1  T>  S  4OO 

1896                   

1,277 

l66,i9S,948 

427  1  80  767 

1807 

I,  SOS 

2O8.70O.03I 

•Z7C  14.4.  677 

1898  

1,721 

254,119,423 

37S.I73.336 

1800    . 

1,942 

286,133,308 

S64,3I2,4O7 

1900    

2,272 

341,922,711 

S6l,S76,lQ1 

1901               

2.3S9 

361,  207,4  s6 

SSS.2'1';,  ^S2 

1902               

2,324 

372,950,062 

6SQ.4QS.OS^ 

TQO'? 

2.27S 

374,68s,  764 

714,  2S8  117 

1004..  . 

2,227 

373,194,284 

788.I34.S79 

IQOS  .  • 

2,23O 

382,148,879 

1,337,897.673 

1906     

2,2IO 

401,134,910 

1,690,576,187 

TQO7 

2.2OI 

444,204,041 

1,662,881,003 

1908            

2,172 

458,827,302 

1,408)030,851 

IQOO  .  • 

2,152 

477,550,154 

I>543>779>573 

igiO  

2,127 

494,122,304 

1,772,240,847 

IQI  I     . 

2,143 

523,109,357 

I.74O.776.6S9 

igi2               

2,151 

570,488,740 

2,  02  S,  493.QO8 

1  Based  chiefly  on  the  Financial  History  of  the  Meiji  Era,  but  the  Reference 
Book  Concerning  Monetary  Affairs  and  the  Imperial  Statistical  Year  Book  have  also 
been  referred  to. 

2  Based  on  Reference  Book  Concerning  Monetary  Affairs  and  Imperial  Statistical 
Year  Book.     All  kinds  of  banks  are  included,  such  as  the  Bank  of  Japan,  Yoko- 
hama Specie  Bank,  national  banks,  Hypothec  Bank,  Provincial  Hypothec  Banks, 
Industrial  Bank,  Bank  of  Taiwan,  Colonial  Bank  of  Hokkaido,  private  banks,  and 
savings  banks.     The  table  is  confined  to  the  figures  after  1893,  prior  to  which  the 
banking  system  was  still  imperfect,  and  the  above-mentioned  statistics  concerning 
the  national  and  private  banks  nearly  cover  it. 


EFFECTS    ON    THE    MONEY    MARKET 


159 


NUMBER  OF   BRANCHES  AND  AVERAGE  AMOUNT  OF  PAID-UP  CAPITAL  OF  ALL 
BANKS  OF  THE  EMPIRE 


Calendar 
Year 

Number 
of  Main 
Offices 

Number  of 
Branches  and 
Detached 
Offices 

Ratio  of 
Number  of 
Branches  and 
Detached 
Places  of  Bus- 
iness  Against 
Number  of 
Main  Offices 

Paid-up 
Capital 

Average 
Amount  of 
Paid-up 
Capital  of 
Main 
Offices 

1891.  . 

663 

1  66 

O   2S 

Yen 
62  916  100 

Yen 

Q4  8t)6 

l804.. 

862 

4O  I 

o  46 

101  379  881 

118  617 

I  80S-  • 

I,OI2 

SS6 

O    S4 

127  60S  2IO 

126  181 

1  896  .... 

1.277 

811 

o  6s 

166  IQS  048 

I-IT  -170 

1807 

I   SOS 

I  O04 

O   72 

2O8  7QO  Oil 

1  18  71  1 

1898  

1,721 

i,  168 

O   7Q 

2S4  I  10  421 

147  6s8 

1899  .  . 

I,Q4.2 

i  720 

o  89 

286  111  1O8 

147  11Q 

IQOO     . 

2  272 

I  Q2O 

o  85 

•14.1  Q22  71  I 

I  SO  404 

IQOI 

2  ISO 

2  O25 

o  89 

•161  2O7  4S6 

I  c-j  i  IQ 

I9O2  .  . 

2.124 

2  Oil 

o  87 

772.  QSO  062 

l6o,478 

IQOT,  .  . 

2  27S 

2  OSS 

O   QO 

174  684  764 

164  607 

IQO4     . 

2  227 

2  OI9 

O   QI 

77-1  IQ4.  286 

167  S77 

IQOS 

2  230 

2  O^O 

O   Q4 

-182  148  870 

171  167 

1906  

2,2IO 

2  187 

O   QO 

4.OI.I3J.  OIO 

l8l,SO^ 

1  9O7.  . 

2  2OI 

2  160 

i  08 

444  2  O4  O4  1 

2OI,8l9 

IQO8         . 

2  172 

2  4.4.1 

I    12 

458  827  ^02 

211  ,246 

I  QOQ  .  . 

2.IS2 

2,4.76 

I    IS 

4.77  ,55O,I  54 

22I,9IO 

IQIO.  . 

2,127 

2  S17 

I    10 

4.04,122  ^O4 

2^2,^09 

IOII  .  . 

2  141 

2  68O 

I    2S 

52^  IOO  ^57 

244.IOI 

1912  

2.ISI 

2,897 

I  .IS 

57O,488,74O 

265,220 

EFFECTS  ON  THE  MONETARY  SYSTEM 

The  monetary  system  of  our  country  during  the  reign  of  To- 
kugawa  Shogunate  was  based  upon  a  gold  and  silver  coin  sys- 
tem, established  in  1601  A.D.  This  system  continued  down 
to  the  last  days  of  the  Shogunate  (for  more  than  two  hundred 
and  sixty  years).  With  the  financial  embarrassment  of  the 
Shogunate  the  quality  of  the  coinage  grew  worse,  and  forged 
coins  were  found  in  circulation.  Moreover,  each  clan  issued 
all  sorts  of  paper  money  with  circulation  within  the  four  cor- 
ners of  each  clan,  which  paper,  too,  witnessed  great  deprecia- 
tion in  value.  The  monetary  system  of  Japan,  therefore,  had 
been  thrown  into  a  state  of  chaotic  confusion  before  the  Resto- 
ration. At  the  Restoration  the  government  paid  the  keenest 
attention  to  the  establishment  of  a  monetary  system.  In 


160       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

April,  1868,  it  decided  upon  the  recoinage  of  old  currency  and 
set  about  the  establishment  of  the  mint.  In  November,  1868, 
a  coinage  law  based  upon  the  decimal  system  was  established, 
by  which  silver  was  made  the  standard  coin  and  gold  was  em- 
ployed as  a  subsidiary.  In  November,  1870,  the  coinage  of 
silver  was  commenced.  In  the  beginning  of  1871  a  gold  stand- 
ard system  was  adopted  by  the  proposal  of  Hirobumi  Ito,  an 
official  in  the  Finance  Department,  who  had  then  been  sent  on 
a  tour  of  inspection  to  the  United  States.  On  May  10,  1871 ,  a 
new  coinage  regulation  was  at  last  promulgated.  At  that 
time,  however,  Mexican  silver  was  employed  in  commerce  with 
Oriental  countries,  and  it  was  convenient  to  employ  silver  in 
our  foreign  commerce.  In  view  of  this  special  circumstance, 
one  yen  silver  coins,  besides  the  standard  coins,  were  minted 
under  the  New  Coinage  Regulation,  for  the  purpose  of  com- 
merce in  the  open  ports. 

Not  only  was  the  production  of  gold  very  meager  in  our 
country,  but,  as  was  stated  before,  inconvertible  paper  money 
which  the  government  had  issued  for  the  pacification  of  the 
disturbances,  annually  increased,  which  was  followed  by  a 
steady  outflow  of  gold  coins.  This  made  the  gold  standard 
system  very  difficult  to  maintain.  By  Proclamation  No.  12, 
May,  1878,  one  yen  silver,  which  had  been  minted  for  com- 
merce in  the  open  ports,  was  permitted  to  be  circulated  in  the 
country  at  large.  In  consequence,  one  yen  silver  coin  became 
legal  tender  having  the  equivalent  value  to  one  yen  gold  coins. 
Accordingly  our  monetary  system  was  changed  from  a  gold 
standard  system  into  a  legal  bimetallism,  which  was  practi- 
cally a  silver  standard  system. 

This  virtual  silver  standard  system  was  in  danger  of  being 
degraded  into  a  paper  money  standard  system  by  the  over- 
issue of  paper  money  at  the  Satsuma  Rebellion,  and  by  the 
consequent  discrepancy  in  value  between  silver  and  paper. 
The  readjustment  of  paper  money  was  successfully  completed 
in  1886,  and  an  ordinary  monetary  system  was  reestablished. 
But  the  system  thus  restored  was  a  silver  standard,  and  the 
legal  bimetallism  was  no  more  than  nominal.  The  fluctua- 


EFFECTS   ON   THE   MONEY   MARKET  l6l 

tions  of  silver  in  the  foreign  markets,  therefore,  could  not  but 
exert  an  immediate  influence  upon  our  economics  and  finances. 
Especially  in  1892-1893,  when  silver  saw  a  great  depreciation 
on  account  of  the  adoption  of  the  gold  standard  system  by 
Austria,  Russia,  United  States  and  India,  great  fluctuations  of 
the  rate  of  exchange  impeded  foreign  commerce,  raised  the 
prices  of  commodities,  encouraged  speculation,  and  threw  our 
economic  world  into  a  state  of  great  confusion.  With  the  de- 
preciation of  silver,  national  expenditures  gradually  increased. 
Therefore,  the  maintenance  of  the  silver  standard  system 
was,  it  was  feared,  opposed  to  our  economic  and  financial 
interests. 

Thereupon,  the  government  thought  it  necessary  to  investi- 
gate our  monetary  system,  and  it  promulgated,  by  Imperial 
Ordinance  No.  113,  October,  1893,  a  regulation  concerning  the 
Board  for  the  Investigation  of  the  Monetary  System.  The 
said  board  further  organized  a  special  commission  for  the  pur- 
pose, which  finished  its  investigation  in  July,  1895.  It  was 
decided  that  there  was  no  present  need  for  the  reform  of  the 
monetary  system,  but  that  there  might  be  an  opportunity  for 
reform  in  the  future.  As  to  whether  the  gold  standard  system 
or  some  other  system  in  such  a  case  should  be  adopted,  there 
was  a  diversity  of  opinion  among  the  commissioners.  The 
government,  therefore,  was  obliged  to  maintain  the  status  quo, 
though  it  had  been  very  much  in  favor  of  the  adoption  of  a 
gold  standard  system.  With  the  outbreak  of  the  Sino- 
Japanese  War  in  1894-1895,  the  government  was  obliged,  or 
was  hi  a  position  to  realize  its  long  cherished  ideal,  the  adop- 
tion of  the  gold  standard  system.  The  circumstances  which 
drove  the  government  to  adopt  it  were  (i)  the  necessity  of 
floating  or  selling  war  loans  abroad,  and  (2)  the  receipt  of  a 
big  sum  of  war  indemnity  from  China. 

The  government,  in  order  to  raise  loans  in  connection  with 
the  war,  issued  war  loan  bonds  amounting  to  120,000,000  yen, 
as  a  part  of  the  estimated  sum  of  250,000,000  yen.  But  the 
actual  subscription  was  only  85,000,000  yen.  The  remaining 
35,000,000  yen  was  finally  raised  by  a  special  issue  to  the 
12 


1 62       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

Deposit  Section.  The  remaining  estimated  sum  was  not 
raised  because  of  the  certainty  of  acquiring  the  indemnity  from 
China  on  the  one  hand,  and  because  of  the  speedy  conclusion 
of  the  war  on  the  other.  The  special  issue  of  35,000,000  yen 
had  to  be  sold  abroad,  which  made  the  government,  and  the 
creditors  also,  conscious  of  the  extreme  inconvenience  of  the 
silver  standard.  Thus,  the  fact  -that  unless  the  gold  standard 
should  be  adopted  foreign  flotation  or  sale  of  bonds  abroad 
could  not  be  easily  accomplished  was  brought  home  to  the 
government.  This  was  the  effect  which  the  war  loan  had  upon 
the  adoption  of  the  gold .  standard  system.  Had  there  not 
been  enough  gold  reserve,  the  adoption  of  a  gold  standard  sys- 
tem would  not  have  been  practicable,  and  indeed  this  was 
the  point  which  bothered  the  heads  of  the  commissioners  of 
the  monetary  system  investigation.  Just  then  the  indemnity 
from  China  served  to  satisfy  the  needs,  and  afforded  impor- 
tant facilities  for  the  adoption  of  the  system. 

The  payment  of  the  indemnity  on  the  part  of  China  was  de- 
cided upon  by  the  treaty  of  peace  at  Bakan  in  April,  1895.  It 
consisted  of  200,000,000  taels,  which  was  the  indemnity  for 
war  expenses,  30,000,000  taels  as  a  compensation  for  the  re- 
turn of  Liaotung  Peninsula,  and  an  annual  amount  of  500,000 
taels  as  an  indemnity  for  garrison  expenses  at  Weihaiwei.  All 
these  sums  were  to  be  converted  into  pounds  and  paid  in  Lon- 
don. Thus,  our  government  was  able  to  receive  between  Oc- 
tober, 1885,  and  May,  1898,  the  indemnity  for  war  expenses 
(with  interest)  amounting  to  £32,900,980,  js.,  'jd.,  the  indem- 
nity for  the  return  of  Liaotung  Peninsula  amounting  to  £4,935, - 
147,  is.,  id.,  and  the  indemnity  for  garrison  expenses  at  Wei- 
haiwei amounting  to  £246,757,  75.  (the  annual  amount  was 
£82,252,  95.),  totalling  £38,082,884,  155.,  6d. 

As  this  acquisition  of  gold  reserve  prepared  the  way  for  the 
revision  of  the  monetary  system,  the  government  submitted 
to  the  Diet  the  monetary  law  and  other  ancillary  drafts,  which 
met  the  approval  of  both  houses,  on  March  26  of  the  same 
year.  The  monetary  law,  together  with  auxiliary  laws  Nos. 


EFFECTS   ON   THE   MONEY   MARKET  163 

16-20,  were  promulgated  and  put  into  force  on  and  after 
October  i  of  the  same  year. 

Prior  to  the  establishment  of  the  gold  standard  system  the 
transfer  of  the  indemnity  was  chiefly  made  by  the  purchase  of 
silver,  and  the  receipt  of  gold  was  accepted  only  with  the 
object  of  averting  the  great  losses  to  the  national  Treasury  due 
to  the  fluctuations  in  the  value  of  gold  and  silver  bullion. 
When  the  adoption  of  the  gold  standard  system  was  decided 
upon,  in  October,  1896,  the  method  of  transferring  on  indem- 
nity was  rapidly  revised,  and  import  of  gold  bullion  was  made 
chiefly  in  order  to  obtain  gold  reserve  for  the  exchange  of  silver 
coins,  which  was  required  for  the  enforcement  of  the  new 
monetary  law. 

Thus,  during  the  period  ranging  from  January  I,  1896, 
when  the  transfer  of  the  indemnity  was  begun,  to  March  31, 
1899,  the  money  delivered  to  the  Bank  of  Japan  for  the  trans- 
fer of  the  indemnity  amounted  to  £30,476,642,  55.,  4^.  Of 
this  sum  the  bills  of  exchange  drawn  amounted  to  £15,81 1,261, 
ios.,  2d.,1  the  purchase  of  silver  stood  at  £3,090,504,  6s.,  3^., 
and  the  receipt  of  gold  was  £11,574,876,  85.,  nd.  Of  this  re- 
ceipt of  gold  the  amount  actually  transmitted  on  September  I , 
1897,  stood  at  £7,733,516,  175.,  gd.,  which  the  government  at 
once  minted  into  gold  coins  to  serve  as  exchange  reserve  for 
one  yen  silver  coins. 

Our  gold  standard  became  firmly  established  by  the  receipt 
of  the  tremendous  indemnity.  This  made  it  possible  not  only 
to  pay  a  huge  gold  exchange,  due  to  the  excess  of  importation 
over  exportation,  which  had  continued  for  several  consecutive 
years  after  1896,  but  also  to  increase  the  circulation  and  re- 
serve of  the  standard  gold  coins,  thus  putting  an  end  to  the  cir- 
culation and  reserve  of  silver  coins  in  March,  1898.  The 
following  table  affords  sufficient  explanation  of  the  sudden 
increase  of  the  circulation  and  reserve  of  gold  coins,  especially 
after  1896. 

1  This  sum  contains  £4,386,000,  proceeds  of  the  sale  of  military  loan  bonds  con- 
verted into  the  bills  of  exchange. 


1 64      WAR  AND  ARMAMENT  LOANS:   ECONOMIC   EFFECTS 
GOLD  COINS  AND  GOLD  RESERVE  AFTER  THE  SINO-JAPANESE  WAR1 


Calendar  Year 

Circulation  of 
Gold  Coins 

Gold  Reserve 

Total 

1803    . 

Yen 

S.74O.4S6 

Yen 
21,806,200 

Yen 

27  S46  6s8 

1804  

5,250,074 

32,344,954 

37.S9S.O28 

1895  

5,162,280 

31,510,800 

36,673,080 

1806.  . 

5,372,714 

90,935,471 

96,308,185 

1807  

l6,S74,S79 

96,913,262 

113.487.841 

1898  

1  8,  1  ^5,184 

89,570,239 

IO7.7OS.423 

1800.  . 

IQ.3SQ.SS3 

10^,142,160 

122,501,722 

IQOO.  . 

I7,S62.6S2 

6s.34Q.l2Q 

82,911,781 

IOOI  .  . 

18,220,150 

68,858,371 

87.O78.  S2I 

IQO2  .  . 

17,378,777 

108,118,817 

125,497,594 

TOO';.  . 

20,492,832 

116,962,184 

I37.4SS.Ol6 

To  sum  up  what  was  said  above,  the  chief  cause  of  the  revival 
of  our  gold  standard  system  may  be  found  in  the  Chinese  in- 
demnity, by  means  of  which  our  country  was  able  to  provide 
sufficient  gold  coins  and  gold  reserve  for  the  exchange  of  one 
yen  silver  coins.  The  necessity  of  the  gold  system,  which  had 
been  felt  in  connection  with  the  flotation  of  the  war  loans, 
only  formed  an  additional  motive.  With  regard  to  the  main- 
tenance of  the  system,  however,  we  must  not  lose  sight  of  the 
great  contribution  toward  it  of  the  public  undertakings  loans 
floated  abroad  in  1900,  nor  of  various  other  foreign  loans 
floated  in  connection  with  the  Russo-Japanese  War. 

The  public  undertakings  loan  of  1900  was  raised  in  the  for- 
eign market  because  of  the  difficulty  of  domestic  subscription. 
Of  this,  54,900,000  yen  was  appropriated  to  national  defense 
expenditures,  viz.,  for  purposes  of  armament.  As  shown  by 
the  figures  for  1900-1901  in  the  preceding  table,  the  gold  coins 
and  gold  reserve  within  the  country  witnessed  a  great  decrease 
as  a  result  of  excess  of  importation  which  had  continued  for  sev- 
eral years.  It  was  due  chiefly  to  the  money  raised  from  for- 
eign loans  that  they  showed  a  slight  recovery  after  1902.  In- 
asmuch as  the  majority  of  the  foreign  loans  were  for  purposes 
of  the  expansion  of  national  defense  (armament  loans)  it 

1  Based  on  Financial  and  Economical  Year  Book  of  the  Finance  Department  and 
Ginko  Tsushin  Roku  (Banker's  Magazine,  Tokyo).  Gold  reserve  is  the  reserve 
fund  for  the  issue  of  convertible  notes,  and  includes  gold  coin  and  bullion. 


EFFECTS   ON   THE   MONEY   MARKET  165 

would  not  be  a  strained  assumption  to  call  them  a  link  between 
the  war  and  armament  loans  on  the  one  hand  and  the  gold 
standard  system  on  the  other. 

Further,  it  was  the  foreign  loans  in  connection  with  the 
Russo-Japanese  War  that  furnished  the  most  remarkable  con- 
tribution in  the  direction  of  the  maintenance  of  the  gold  stand- 
ard system.  The  total  amount  of  public  loans  floated  in  con- 
nection with  the  Russo-Japanese  War,  outstanding  at  the  end 
of  the  fiscal  year  of  1906,  stood  at  1,627,000,000  yen,  accord- 
ing to  their  issue  prices.  Of  this,  583,000,000  yen1  belonged 
to  domestic  loans  and  1,044,000,000  yen2  belonged  to  foreign 
loans.  The  war  expenditures  actually  defrayed  by  war  loans 
did  not  exceed  1 ,418,000,000  yen.  There  were  also  the  depart- 
ment extraordinary  affairs  expenditures,  amounting  to  221,- 
000,000  yen,  and  extraordinary  military  expenditures  for  post- 
bellum  works,  transferred  to  the  general  account,  amounting 
to  137,000,000  yen.  These  expenditures,  however,  were  de- 
frayed by  the  continuation  of  increased  taxation,  and  by  the 
natural  increase  of  the  ordinary  annual  revenue.  The  fund 
raised  by  the  flotation  of  the  war  loan,  therefore,  left  a  surplus 
of  210,000,000  yen,  in  round  numbers.  This  is  the  surplus 
money  in  the  national  Treasury  brought  forward  to  each  suc- 
ceeding fiscal  year  after  the  fiscal  year  1908,  and  a  greater  por- 
tion of  it  consists  in  gold  coins  deposited  abroad.  One  half  of 
it  directly  supports  the  gold  standard  system  as  specie  reserve 
for  convertible  notes,  while  the  other  half  indirectly  checks  the 
decrease  of  specie  reserve  as  the  foreign  exchange  fund.  This 
specie  abroad  gradually  decreased  because  of  foreign  pay- 
ments— financial  as  well  as  commercial — but  the  government 
replenished  it  by  occasional  conversions  of  domestic  war  loans 
into  foreign  ones.  In  April,  1910,  a  4  per  cent  French  loan, 
amounting  to  Fr.45O,ooo,ooo,  was  floated,  and  in  May  and 
August  of  the  same  year  the  third  4  per  cent  sterling  loan, 
amounting  to  £11,000,000,  was  raised,  both  of  which  were 

1  The  first,  second  and  third  Exchequer  bond  and  extraordinary  military  expend- 
itures loan. 

1  The  first  and  second  6  per  cent  sterling  loan,  the  first  and  second  4.5  per  cent 
sterling  loan,  and  the  second  4  per  cent  sterling  loan. 


1 66       WAR   AND   ARMAMENT   LOANS:    ECONOMIC   EFFECTS 


employed  for  the  redemption  of  domestic  loans,  such  as 
Imperial  5  per  cent  loans,  navy  loan,  war  loan  and  exchequer 
bonds.  At  the  redemption  of  these  loans,  domestic  4  per  cent 
bonds  were,  on  request,  delivered  instead  of  cash,  which  gave 
rise  to  the  increased  issue  of  the  third  domestic  4  per  cent 
loan.  This  was  the  most  important  contribution  of  foreign 
flotation  or  foreign  conversion  of  war  and  armament  loans 
toward  the  maintenance  of  the  gold  standard. 

Thus,  from  the  beginning  of  the  war,  no  small  amounts  of 
foreign  flotations,  and  afterward  domestic  war  loans,  were  con- 
verted into  foreign  loans.  The  specie  thus  obtained  was  either 
deposited  abroad  or  minted  into  coins.  The  remarkable  in- 
crease of  gold  coins  and  gold  reserve  in  1906,  and  especially  in 
1910,  is  indicated  by  the  following  table: 

GOLD  COINS  AND  GOLD  RESERVE  AFTER  RUSSO-JAPANESE  WAR1 


Calendar  Year 

Circulation  of 
Gold  Coins 

Gold  Reserve 

Total 

1904.  . 

Yen 
2O.'*46,564 

Yen 
70.004.726 

Yen 
100  251  290 

I9O5.  . 

24  565.4.88 

145  284  ^60 

1  60  840  857 

IQO6.  . 

•U  588  657 

147  2O2  125 

181  790  782 

IQO7.  . 

24  078  410 

l6l  742  1^1 

l85  82O  541 

1908  .  . 

27,051.4.27 

l6o.5O4  514 

iq6  555  Q4I 

IQOQ.  . 

28.672.^00 

217.  843  275 

246  515  584 

IOIO.  . 

31,208  214 

222  ^82  465 

25T,  5QO  670 

IQII  .  . 

7-1   Q6Q  Q6Q 

220  I  54  22O 

26^  124  l8o 

IQI2  .  . 

15,504.084 

247,  02^.  7,80 

282.617.464 

I9H.  . 

•*7,  3,48.  21O 

224  365  88O 

261,714  no 

The  causes  of  the  increase  of  the  gold  reserve  were  multifari- 
ous. The  foreign  flotation  and  foreign  conversion  of  war  loans, 
foreign  subscription  of  local  loans  and  debentures,  or  the  pur- 
chase of  foreign  bills  by  the  Bank  of  Japan,  constituted  the  im- 
portant factors.  Against  this,  however,  there  were  excess  of 
importation  for  several  consecutive  years,  the  repayment  and 
payment  of  capital  and  interest  of  the  foreign  loans,  and  the 
purchase  of  warships  and  arms  from  foreign  countries.  It  was 

1  Based  on  Financial  and  Economical  Year  Book  of  the  Finance  Department  and 
Ginko  Tsushin  Roku  (Banker's  Magazine,  Tokyo).  Gold  reserve  is  the  reserve 
fund  for  the  issue  of  convertible  notes,  and  includes  gold  coin  and  bullion. 


EFFECTS    ON    THE   MONEY   MARKET  167 

mostly  due  to  the  subscription  and  conversion  of  foreign  war 
loans  that  the  maintenance  and  increase  of  the  gold  reserve 
was  made  in  the  face  of  these  factors. 

EFFECTS  ON  THE  CURRENCY  AND  PRICES 

In  another  monograph  of  this  series l  a  full  account  is  to  be 
given  of  currency  and  prices.  In  this  part,  therefore,  partly 
because  of  the  limit  of  space  and  partly  for  the  avoidance  of 
repetitions,  only  a  statistical  summary  is  given. 

It  goes  without  saying  that  the  issue  and  conversion  of  war 
and  armament  loans  swelled  the  currency  and  led  to  the  rise  of 
prices. 

From  the  Restoration  to  1881  prices  generally  showed  an 
advance,  which  was  undoubtedly  due  to  the  increase  of  gov- 
ernment paper  money,  the  Restoration  and  the  Satsuma  Re- 
bellion having  greatly  swelled  the  currency.  From  1 88 1  to  1 887 
prices  were  much  lowered  on  account  of  the  contraction  of 
currency.  From  1888  to  1893  prices  rose  with  the  gradual  ex- 
pansion of  currency.  This  was  due  to  the  rise  of  enterprises 
encouraged  by  the  specie  influx  and  the  fall  of  money  interest 
as  a  result  of  the  favorable  balance  of  trade,  which  in  turn  was 
due  to  the  completion  of  divers  readjustments.  The  expan- 
sion of  currency  and  the  rise  of  prices  in  this  period  can  be  said 
to  have  no  particular  relation  to  the  war  and  armament  loans. 
But  during  the  first  half  of  the  period  from  1894  to  1900  the  ex- 
pansion of  currency  and  the  rise  of  prices  were  primarily  due  to 
the  increase  of  temporary  loans  in  connection  with  the  Sino- 
Japanese  War,  and  to  the  consequent  increased  issue  of  con- 
vertible notes  beyond  the  legal  limit ;  while  during  the  second 
half  of  the  same  period  the  expansion  of  currency  and  the  rise 
of  prices  were  primarily  due  to  the  receipt  of  the  indemnity,  to 
the  extension  of  the  authority  of  the  Bank  of  Japan  with  re- 
gard to  the  issue  of  bank  notes  on  security  reserve,  to  the  con- 
sequent lowering  of  interest  on  the  part  of  the  Bank  of  Japan, 
and  to  the  rise  of  the  enterprising  spirit. 

From  1900  to  1903  there  was  a  contraction  of  currency  and 

1  War  and  armament  expenditures  of  Japan. 


1 68       WAR   AND   ARMAMENT   LOANS:   ECONOMIC    EFFECTS 
CURRENCY  AND  PRICES1 


Calendar 
Year 

Government 
Loans 

Paper  Money 
and  Qonvert- 
ible  Notes 

Circulation 
of  Specie 

Total 
Amount  of 
Currency 

Index 
No. 

1868  

Yen 

Yen 
24,037,390 

Yen 

Yen 
24,037,390 

1869  

50,090,867 

50,090,867 

1870.  . 

55,500,000 

55,500,000 

1871  .  . 

60,272,000 

12,440,817 

72,712,817 

1872  .  . 

68,400,000 

19.  1O7,  194 

107,707,104 

1871  .  . 

79.74-1,224 

60,446,286 

140,189,510 

95 

1874  . 

0-3,807,^04 

59,108,881 

153  006,185 

09 

1875  . 

IOO,4QI.87O 

51.110.I5Q 

151  81I.O20 

I  O2 

1876  

1877.  . 

9,486,000 

106,891,583 
1  10,149,843 

56,800,761 
56,191,012 

163,692,343 
I75.14O.855 

I  O2 
I  O2 

1878.  . 

15,000,000 

165.607,598 

56.297,l84 

22I.OO4.782 

IOO 

1870.  . 

15,000,000 

164..  154.915 

5I.557.l67 

215  9I2,IO2 

IOO 

1880  

15  000,000 

I5O  166.817 

4.4  627.241 

203  994  080 

91 

1881  

15  000,000 

I  51  1O2  Oil 

4.2  44O  585 

105  742  5Q8 

QO 

1882  

15  ooo  ooo 

1/11  754.  161 

46  622  128 

TQO  176  4.01 

QO 

i88v  . 

10,000,000 

112.  275.  Oil 

eo.  151.  211 

l82  626,226 

91 

1884.  .  .  . 

12,000,000 

124  1Q6.I76 

51,581,787 

177  077.961 

94 

1885  

15  066,205 

122  456  646 

55  665  710 

178  122  365 

QO 

1886  

36  882,892 

1  16  852  146 

18  110  610 

175  182  756 

96 

1887  

36  790,808 

1  17  871  O8l 

11  2QO.72I 

169  164  7O2 

QO 

1888  

21.o8l.  755 

I4O  I84.Q77 

17  162.555 

177.547.512 

IO1 

1889  .... 

TO  271  241 

146  760  892 

/ir  QOI  OO1 

188  662  795 

1  08 

1800.  . 

32,000  ooo 

l62  OI5  2OI 

51  256  504 

211  271.705 

III 

1891  .  . 

32  ooo  ooo 

1  68  4OO  77  5 

51  215  8lQ 

219  726  614 

III 

l8Q2  .  . 

32  ooo  ooo 

I7O  562  117 

46  224  004 

2l6  786  121 

116 

1801  . 

32  ooo  ooo 

187  826  247 

en  672  O72 

218  4.08  no 

121 

1804.  . 

5I.51O.OOO 

185  ooo  044 

62  712  241 

247  711  285 

112 

189";.  . 

7  1  500  ooo 

212  262  825 

60  717  086 

282  ooo  8n 

1  4O 

1896  

76  ooo  ooo 

224  l87  Q57 

76  l85  72Q 

34,966,916* 
100  171  686 

151 

1897  .  . 

28  831,132 

2l8  7O4  885 

QT  765  257 

11O  47O  142 

172 

1898  .  . 

22  OOO  OOO 

2O4  678  190 

80  941  508 

42,967,585  a 

28^  610  608 

161 

1899.  . 

24,5OO,OOO 

255  660  411 

82  140  051 

22,829,662  a 
117  800  482 

189 

20,419,871  » 

•  Shows  convertible  notes  issued  on  security  reserve. 

1  Based  on  the  Financial  History  of  the  Meiji  Era;  Summary  of  the  Circumstances 
Attending  the  Reform  of  Monetary  System;  Report  of  the  Commission  for  the  Investi- 
gation of  the  Monetary  System;  Materials  for  Reference,  by  the  Tokyo  Clearing 
House,  and  the  Special  Investigation. 

The  government  loans  are  based  upon  the  Special  Investigation  of  the  Finance 
Department,  and  include  exchequer  bills  and  temporary  loans  of  the  government. 

The  total  amount  of  currency  is  the  aggregate  sum  of  specie  and  paper  money. 

The  index  number  prior  to  1892  is  based  upon  the  report  of  the  Commission  for 
the  Investigation  of  the  Monetary  System,  and  was  calculated  by  putting  the  average 
prices  of  commodities  in  Tokyo  from  1873  to  l&77  at  IO°-  The  figures  after  1892 
are  based  on  the  Investigation  of  the  Bank  of  Japan,  putting  the  average  price  of 
the  chief  commodities  within  the  country  at  100. 


EFFECTS    ON    THE   MONEY   MARKET 
CURRENCY  AND  PRICES — Continued 


169 


Calendar 
Year 

Government 
Loans 

Paper  Money 
and  Convert- 
ible Notes 

Circulation 
of  Specie 

Total 
Amount  of 
Currency 

Index 
No. 

IQOO.  . 

Yen 
40,200,000 

Yen 
210.821.770 

Yen 
80.460,  is6 

Yen 
120.282.  1  is 

181 

IQOI  .  . 

77,200,000 

2i6,lS5,8s8 

92,610,211 

41,220,903  • 
308,766,069 

I7O 

IQO2  .  . 

76,850,000 

214..O77.74.S 

04..478.OO2 

22,738,395  ' 
128.  SSS.  74.7 

176 

IQOV  . 

56,849,200 

214..850.QI8 

98,231,864 

2,975,560  » 
777.001.782 

187 

IQO4.  . 

I  S4..  84.Q.  2OO 

288.  524..  14.5 

102,607,863 

tQI.It3.OO8 

2O1 

IQO5.  - 

178,624,200 

^14.676,557 

II6.857.  117 

83,044,526  • 
4.71,577.604 

217 

I  QO6  .  . 

114.,  60S.H1 

•14.1  766.164. 

lie  177.144. 

79,195,793  * 
4.76  04.1.108 

222 

IQO7.  . 

78.4.82.  1  S7 

160.084..!  1  1 

H8.452.757 

74,564,039  • 

SOQ.4.16.868 

217 

1008  .  . 

7S  7S1  6O1 

752  774.  272 

I  co  66  5  47  5 

88,241,  980  • 
coi  1OO  74.1 

2IS 

IQOO  .  . 

QQ  5O8  64.Q 

7  52  76l  2OI 

I  5Q  214  164 

63,329,758  • 
^1  1  077.  ^65 

214 

IQIO.  . 

14.7.  1QO.  202 

4.01.624..  Q28 

168  130,182 

14,919,926" 
s6o.7SS.IIO 

226 

IOII  .  . 

205  591  2O2 

4.77  TOO  1  16 

174  6^7  60^ 

59,242,463  » 
608  036  719 

21S 

1012  .  . 

I  54.  ci7  877 

4.4.8  021  7O8 

175  080  776 

84,244,896  a 
624  011,484 

2SI 

81.898.  326* 

'Shows  convertible  notes  issued  on  security  reserve. 

depression  of  prices  which  were  chiefly  due  to  the  continuous 
efflux  of  specie  caused  by  successive  unfavorable  balances  of 
trade  and  the  consequent  contraction  in  money  circulation. 
It  must  be  admitted,  therefore,  that  this  phenomenon  had 
little  to  do  with  war  and  armament  loans.  The  unprece- 
dented increase  in  currency  and  prices  in  the  years  extending 
from  1904  to  1907  was  undoubtedly  due  to  the  enormous  tem- 
porary loans  in  connection  with  the  Russo-Japanese  War,  and 
also  due  to  the  issue  of  notes  in  unprecedented  excess  in  order 
to  have  the  fund  raised  by  foreign  war  loans  transferred  to 
Japan.  The  period  subsequent  to  1908  was  one  of  commer- 
cial crisis;  there  was  a  slight  contraction  of  currency  and  a 
slight  fall  of  prices.  After  1910  there  was  a  remarkable  ex- 
pansion of  currency  and  a  rise  of  prices,  due  to  the  increase  of 


1 70       WAR   AND   ARMAMENT   LOANS:   ECONOMIC   EFFECTS 

temporary  loans  for  the  conversion  of  domestic  and  foreign 
loans,  inclusive  of  war  and  armament  loans,  and  due  to  the  enor- 
mous amount  of  money  raised  by  foreign  loans  and  trans- 
ferred to  Japan.  It  was  not  long,  however,  before  the  reaction 
was  felt  in  the  economic  and  financial  world.  Thus  the  year 
1912  drew  to  its  close  amid  general  depression. 

EFFECTS  ON  THE  RATE  OF  INTEREST 

In  the  chaotic  period  of  political  renovation  of  the  first  years 
of  Meiji  it  was  only  natural  that  money  interest  should  have 
had  no  fixed  standard  by  which  to  abide.  Even  though  the 
paper  money  for  war  expenses  had  not  been  issued,  the  rate  of 
interest  would  have  been  very  high.  During  the  period  ranging 
from  1868  to  1873  the  average  bank  rates  of  interest  on  se- 
cured loans  ran  from  14  per  cent  to  18  per  cent  per  annum. 
This  rate  can  not  be  assigned  to  the  issue  of  government  paper 
money.  Though  money  interest  slightly  fell  in  1875-1876,  it 
rose  again  in  1877,  the  reason  assignable  for  this  rise  being  the 
fracture  of  credit  and  rise  of  prices  which  accompanied  the 
increased  issue  of  inconvertible  paper  money  and  bank  paper 
money.  How  exorbitant  were  the  interest  rates  at  that  time 
may  be  learned  from  the  promulgation  of  the  Usury  Law  by 
Notification  No.  66,  September,  1877,  whereby  a  restriction 
was  imposed  that  the  interest  on  100  yen  or  less  should  not 
exceed  20  per  cent  per  annum;  100  yen  to  i  ,000  yen,  15  per  cent 
per  annum;  and  from  1,000  yen  upwards,  12  per  cent  per 
annum. 

Notwithstanding  these  legal  restraints,  the  interest  rates 
rose  by  leaps  and  bounds,  which  was  due  to  the  issue  of  the 
reserve  paper  money  and  inconvertible  notes.  This  high 
rate  continued  till  1881,  when  the  readjustment  work  was 
commenced.  The  rise  of  money  interest  prior  to  1881  may  be 
clearly  seen  from  the  table  on  the  opposite  page. 

When,  in  1881,  the  readjustment  of  inconvertible  paper 
money  was  entered  upon,  prices  began  to  decline,  followed  by  a 


EFFECTS   ON    THE    MONEY   MARKET 
INTEREST  ON  LOANS  IN  TOKYO,  1 868-1 


171 


Calendar  Year 

Maximum 

Minimum 

Average 

1868  

Per  Cent 

Per  Cent 

Per  Cent 
14  oo 

i860.  . 

I  -3      CQ 

1870.  . 

13  80 

1871  .  . 

14  oo 

1872.    . 

11    5O 

187-;  

12    8O 

1874.  . 

18.00 

6  oo 

12   96 

i87S-  . 

18  oo 

7  oo 

II    8O 

1876.  . 

1  8  oo 

6  oo 

12    OI 

1877  

12  .OO 

9.00 

IO   OO 

1878  

15.00 

8.00 

IO.41 

1870  

IS.OO 

8  oo 

12    l6 

1880  

18.00 

Q   OO 

11    12 

1881  

18.00 

7  .20 

I4.O6 

fall  in  money  interest.  In  1886  the  work  of  readjustment  was 
brought  to  a  successful  conclusion,  money  circulation  became 
more  sluggish,  bringing  down  money  interest,  and  a  convenient 
opportunity  was  offered,  as  has  been  noticed,  for  the  flotation 
of  the  navy  loan  and  for  the  consolidation  of  public  loans. 
The  decline  of  the  rate  of  interest  is  indicated  by  the  fact  that 
at  the  time  the  Bank  of  Japan  was  established  the  rate  of  dis- 
count stood  at  2.8  sen  per  diem,  while  in  1886  it  fell  to  1.35  sen 
per  diem.  The  average  rate  of  interest  in  the  city  of  Tokyo  in 
1882  stood  at  10.1  per  cent  per  annum,  and  fell  to  9.16  per  cent 
in  1886  and  to  8.74  per  cent  in  1887.  The  above  may  be 
looked  upon  as  the  influence  of  the  issue  and  redemption  of 
government  paper  money,  i.e.,  war  loan,  upon  money  interest. 
Subsequent  fluctuations  in  money  interest,  however,  can  not 
be  traced  to  the  same  cause. 

Thus,  in  1887,  the  fall  of  money  interest,  together  with  the 
commencement  of  the  exchange  of  silver  coins,  brought  about 
a  favorable  balance  of  trade,  and  with  it  the  rise  of  enterprises. 

1  The  figures  prior  to  1874  are  based  on  the  investigation  of  the  Mitsui  Bank, 
and  the  figures  after  1875  on  the  investigation  of  the  Tokyo  Bank  Association. 
The  average  shows  the  average  of  the  twelve  months  of  each  year.  The  figures 
after  1875  are  calculated  on  the  basis  of  loans  ranging  from  1,000  yen  to  10,000  yen. 


172       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

Within  a  shor£  time  subsequent  to  1890  a  reaction  came  and 
money  circulation  became  stringent,  bringing  about  a  sort  of 
panic.  The  rich  harvest  of  rice  for  1890-1891  and  the  depre- 
ciation in  silver  coins  from  1891  remedied  the  unfortunate 
tendency  in  foreign  trade.  The  financial  markets  were  again 
rejuvenated,  money  circulation  became  sluggish,  and  the  fall  of 
interest  in  1893  was  quite  an  unprecedented  one.  The  follow- 
ing tables  show  the  rate  of  interest  at  the  main  office  of  the 
Bank  of  Japan  during  the  period  extending  from  its  establish- 
ment to  1893,  and  the  rate  of  interest  on  loans  in  Tokyo  City: 

INTEREST  RATE  OF  THE  BANK  OF  JAPAN  (MAIN  OFFICE),  1882-1893 x 

(Sen  Per  Day  for  Every  100  Yen) 
TABLE  I 


Revised  Date 

Days  of 
Continuance 

Time  Loan 

Rate  of 
Discount  of 
City  Bills 

Rate    of 
Discount  of 
Country  Bills 

October         I,  it 
November  .2  1, 
December     I, 
March         14,  li 
October         I  , 
November  29, 
December  10, 
April            26,  if 
July               3. 
July              17, 
August        12, 
November  19, 
February       i,  i! 
April              2, 
April           17, 
August          6, 
August        25, 
March           4,  li 
April             9, 
May              3, 
May            28. 
June            22, 
October       14, 
October       22, 
January      24,  H 
January        4,  li 
March           9, 
May            ii, 
June              2, 
August        24, 
September  29, 
January        4,  i! 
February      i  , 
February    19, 
May              8, 
June              i, 
August        19, 
September    3, 
June            14,  18 

82  

4i 

10 
IO2 
2OI 
59 
II 
138 
68 
14 
26 
99 
74 
60 
IS 
ill 
19 
191 
36 
24 
25 
25 

114 

8 
94 
345 
65 
63 

22 
83 
26 

97 
28 

18 
78 
24 
79 
IS 
284 
128 

Sen 
(.01     (11%  pe 

(.01       (11% 

.74     (10% 
•  47     (9% 
•  19     (8% 
.19     (8% 
•  19     (8% 
•  19     (8% 
.19     (8% 
•  19     (8% 
.33     (8.5% 
•  47     (9% 
.74     (10% 
•47     (9% 
.19     (8% 
.05     (7-5% 
•  92     (7% 
.92     (7% 
.73     (6.3% 
.64     (6% 
•  Si     (5-5% 
•  37     (5% 
.53     (5-5% 
.64     (6% 
•  Si     (5-5% 
.64     (6% 
•  59     (5.8% 
.64     (6% 
.73     (6.3% 
.81     (6.6%  ' 
.86     (6.8% 
.81     (6.6% 
.75     (6.4% 
.70     (6.2% 
•  75     (6.4% 
.81     (6.6% 
.86     (6.8% 
•  92     (7% 
•  78     (6.5% 

r  ann 

urn) 
) 

) 
) 
) 

) 
) 

1 
i 

) 
) 

i 

) 
) 

) 
) 

) 
) 

) 
) 

Sen 
.80 
.60 
.60 
•  40 
.20 
.10 
.00 
.80 
.00 
.  10 
.20 
•  40 
.60 
.40 
•  30 
.00 
.90 
.80 

.70 
.60 
•  SO 
•  35 
•  SO 
.60 
•  SO 
.60 
•  SO 
.60 
.70 
.80 
.85 
.80 
•  75 
.63 
•  75 
.80 
-8S 
•  90 
•  70 

• 

Jen 

•  SO 
•  30 

.20 
.OO 
.20 

•  30 
.40 
.60 
.80 
.60 
•  50 
.20 

.10 
.00 
•  90 
.80 
.65 
•  SO 
.65 
.80 
.65 
.80 
.65 
.80 
.85 
.90 
.00 
.95 
•  90 
.80 
•  90 
•  95 

.00 
.10 
90 

83  

84  

85      .... 

86  

87    

88  

89  

90      ... 

1  Based  on  an  investigation  of  the  Bank  of  Japan. 


EFFECTS   ON   THE   MONEY   MARKET 
TABLE   II 


173 


Revised  Date 

Days  of 
Continuance 

Interest  on 
Loans  and 
Rate  of 
Discount  on 
Security 

Rate  of 
Discount  of 
City  Bills 

Rate  of 
Discount  of 
Country  Bills 

Interest  on 
Overdrafts 
and  on  Cor- 
respondence 

October      20,  1890   

Sen 
i  90 

Sen 
i   80 

Sen 

Sen 

March          2,  1891  

65 

2    IO 

2    OO 

76 

I    8O 

July             21,     "     

492 

i  75 

i  85 

November  24,     "    

119 

i  6s 

I    60 

I   75 

March        23   1892   .    . 

69 

i  So 

May            3  1  1  1  893   .    ... 

94 

i  30 

I    30 

September   2,     "    

So 

i  .50 

I  .50 

I  60 

i  70 

62 

INTEREST  ON  LOANS  IN  TOKYO,  1882-1893 l 


Calendar  Year 

Maximum 

Minimum 

Average 

1882  

Per  Cent 
13  .00 

Per  Cent 
7.20 

Per  Cent 

IO.  IO 

1883.  . 

9.08 

6.80 

7.  SQ 

1884.    . 

IS   OO 

IO   2S 

10.92 

1885  

16.  so 

IO.OO 

II  .38 

1886  

IO.  SO 

7.06 

9.  16 

1887.  . 

II  .00 

7    13 

8.74 

1888  

12  .OO 

8.00 

9.66 

1880.  . 

12  .OO 

8.00 

10.  17 

1890  

12  .  15 

9.07 

10.50 

1891  .  . 

II  .  IO 

7.81 

9  .33 

1892.  . 

9.18 

7.37 

8.37 

1893  

9  .26 

5.65 

7.19 

v  The  fluctuations  in  money  interest  after  the  Sino- Japanese 
War  were  largely  due  to  the  vicissitudes  of  government  and 
private  enterprises  and  of  foreign  commerce.  At  the  begin- 
ning of  the  war,  however,  the  influence  on  interest  caused  by 
funded  and  floating  war  loans  was  by  no  means  insignificant. 
Before  the  outbreak  of  the  war  the  Bank  of  Japan,  in  antici- 
pation of  the  hostilities,  raised  the  rate  of  interest  by  one  rin 
per  diem.2  On  June  18,  1894,  and  in  July,  when  the  war  broke 
out,  the  bank  further  raised  the  interest  by  2  rin  per  diem.3 
By  this  time  the  government  had  contracted  a  temporary  loan 

1  Based  on  an  investigation  of  the  Tokyo  Association  of  Bankers. 

2  Daily  interest  one  rin  per  100  yen,  i.e.,  one  yen  per  100,000  yen. 

3  Cf.  table  above. 


174       WAR   AND   ARMAMENT   LOANS:   ECONOMIC   EFFECTS 

of  50,000,000  yen  from  the  Bank  of  Japan  as  an  urgent  finan- 
cial measure.  This  sum,  together  with  the  surplus  brought 
over  from  the  preceding  fiscal  year,  had  been  appropriated  for 
the  war  expenditures.  Changes  in  interest  after  1894  can  De 
regarded  as  the  result  of  the  flotation  of  war  loans,  but  the 
sluggishness  of  money  circulation  for  several  years,  together 
with  the  completion  of  the  banking  system,  the  increase  of  the 
capital  of  banks,  and  the  withdrawal  of  funds  in  anticipation  of 
the  war  by  means  of  the  raising  of  the  interest  by  the  Bank  of 
Japan,  checked  any  unnecessary  rise  in  interest.  In  1895  a 
tremendous  amount  of  war  loans  was  floated,  but  there  were 
no  remarkable  changes  in  the  rate  of  interest  during  the  same 
year.  But  after  the  war,  in  the  first  half  year  of  1896,  the  in- 
creased war  loans  at  last  began  to  affect  the  rate  of  interest. 
At  the  close  of  1895  the  war  expenditures  were  estimated  at 
159,000,000  yen,  which  were  disbursed  out  of  the  fund  raised 
by  public  loans,  amounting  to  85,000,000  yen,  to  say  nothing 
of  the  use  of  the  surplus  and  the  special  accounts  funds.  Until 
May,  1896,  the  temporary  loans  from  the  Bank  of  Japan,  and 
the  fund  advanced  out  of  the  several  special  accounts,  re- 
mained still  unredeemed.  The  government  was  obliged  to 
make  the  Bank  of  Japan  issue  convertible  notes  to  the  amount 
of  50,000,000  yen,  on  depositing  with  the  bank  50,000,000 
yen  out  of  the  indemnity  deposited  in  London.  Moreover, 
the  general  rise  of  the  enterprising  spirit,  which  was  wit- 
nessed from  the  beginning  of  1895  m  expectation  of  the  victory, 
reached  its  climax  with  the  receipt  of  the  indemnity  in  the  lat- 
ter half  of  1895.  Prices  ran  up,  and  the  balance  of  trade 
turned  unfavorably.  Just  then  there  were  rumors  of  failure  in 
the  rice  and  barley  crops,  and  the  financial  world  became  quite 
alarmed.  When  the  government  tried  to  raise  the  remainder  of 
the  war  loan,  amounting  to  35,000,000  yen,  in  March,  1896,  the 
rate  of  interest  in  Tokyo  ran  as  high  as  7  per  cent  to  8  per  cent, 
promising  a  gloomy  prospect  for  the  subscription.  Therefore 
the  government  resorted  to  a  special  issue,  delivering  to  the 
Deposit  Section  25,000,000  yen,  and  the  remainder,  10,000,000 
yen,  being  floated  in  the  market  on  eight  occasions;  notwith- 


EFFECTS    ON    THE    MONEY   MARKET  175 

standing  which  the  results  could  not  have  been  worse,  only 
1,500,000  yen  having  been  subscribed.  As  a  result  of  the  loan 
on  the  deposit  of  the  indemnity  the  money  circulation  became 
sluggish.  Prices  rose,  however,  by  the  increased  issue  of 
convertible  notes,  which  tightened  the  money  market  in  July, 
and  interest  was  raised  by  one  rin  at  the  end  of  September. 
In  Osaka  a  certain  bank  suspended  payment,  and  the  year 
came  to  a  close  with  great  financial  uneasiness;  The  Bank  of 
Japan  raised  its  interest  by  2  rin  on  June  14,  1897.  From  that 
time  to  March  14  of  the  following  year  the  rate  of  interest  was 
raised  on  five  occasions  by  the  same  bank.  Interest  on  loans 
and  the  rate  of  discount  on  security  was  2.7  rin  per  day,  the 
rate  of  discount  of  city  bills  was  2.4  sen  per  day,  and  the  inter- 
est on  overdrafts  stood  at  2.9  sen  per  day. 

In  view  of  this  financial  distress  the  government  decided  to 
remedy  the  situation  by  the  use  of  the  indemnity.  It  set 
about  the  purchase  of  public  loans  with  convertible  banknotes, 
which  the  government  got  from  the  Bank  of  Japan  upon  de- 
posit of  the  indemnity.  Thus,  from  April,  1898,  to  October, 
1898,  the  Bank  of  Japan  purchased  consolidated,  war,  navy 
and  hereditary  pension  bonds,  and  imperial  5  per  cent  bonds, 
etc.,  which  totalled  38,707,770  yen.  As  a  result  the  monetary 
circulation  became  somewhat  sluggish,  and  the  rate  of  interest 
showed  a  tendency  towards  depreciation.  The  above  facts 
show  that  increased  issue  and  the  redemption  of  war  loans  and 
temporary  loans  had  something  to  do  with  the  fluctuations  of 
interest.  In  March,  1899,  the  Bank  of  Japan  was  authorized 
to  increase  the  limit  of  issue  on  security  reserve  to  120,000,000 
yen,  with  an  addition  of  35,000,000  yen.  Just  then  the  arma- 
ment expansion  program  was  in  course  of  execution,  and  there 
were  some  indications  that  this  prompted  the  increased  issue 
of  convertible  notes  in  the  form  of  temporary  loans.  On  the 
whole,  however,  the  Bank  of  Japan  lowered  of  its  own  accord 
its  rate  of  interest  on  several  occasions  in  order  to  stimulate  the 
enterprising  spirit.  As  a  result  prices  advanced,  the  balance 
of  trade  became  unfavorable,  and  the  efflux  of  specie  seemed 
to  know  no  bounds,  thus  reducing  the  specie  reserve  of  the 


I  76       WAR   AND   ARMAMENT   LOANS:   ECONOMIC   EFFECTS 

Bank  of  Japan  day  by  day.  In  June,  1900,  the  Boxer  Uprising 
occurred,  and  our  country  despatched  a  big  army  in  concert 
with  the  other  powers.  This  gave  rise  to  the  increased  issue  of 
convertible  notes  as  temporary  loans  for  war  expenditures. 
Prices  and  interest  rose  again.  The  efflux  of  specie  became 
marked.  The  specie  of  the  Bank  of  Japan  decreased  even  to 
60,000,000  yen,  thus  reducing  monetary  circulation  to  an  alarm- 
ing stringency,- till  it  ended  in  the  great  panic  of  1901.  The 
tightness  of  money  circulation  since  the  latter  half  of  1900  put 
the  banks  on  their  guard — so  much  so  that  the  smaller  banks 
in  the  provinces  were  cut  off  from  the  supply  of  money  and 
were  reduced  to  bankruptcy.  During  1901  the  banks  which 
suspended  their  payments  in  the  Kwansai  districts,  headed  by 
Osaka,  numbered  thirty-four,  and  an  unheard-of  confusion 
and  turmoil  was  witnessed  in  the  financial  world.  This  also 
goes  to  prove  the  close  connection  between  the  war  loans  and 
fluctuations  of  interest. 

With  the  decline  of  credit  transactions  the  money  market 
was  gradually  adjusted.  With  the  opening  of  1902  money 
circulation  became  a  little  sluggish,  a  favorable  balance  of 
trade  returned,  and  the  banks  lowered  the  rate  of  interest.  In 
March,  1902,  the  Bank  of  Japan  lowered  its  rate  of  interest  by 
2  rin,  and  there  was  a  lowering  of  8  rin  on  five  occasions  by 
March  of  the  following  year.  To  sum  up  what  was  said  be- 
fore, from  the  outbreak  of  war  to  May  8,  1896,  fluctuations  in 
the  rate  of  interest  were  brought  about  by  war  loans,  and 
afterward  by  the  issue  of  temporary  loans  connected  with  the 
Boxer  Uprising  in  1900-1901.  The  inflation  of  convertible 
notes  and  the  consequent  rise  of  prices  gave  rise  to  a  marvel- 
ous increase  in  money  interest  in  1901.  Other  fluctuations  in 
interest  were  brought  about  by  other  causes  of  which  the 
receipt  of  indemnity  played  an  important  part.  It  lowered 
the  interest  and  helped  on  the  progress  of  enterprise  to  no 
small  extent.  Various  tables  concerning  the  money  interest 
during  the  period  to  substantiate  the  above  statements  are 
given  on  the  next  two  pages. 

The  condition  of  our  economic  world  in  1903,  the  year  pre- 
vious to  the  outbreak  of  Russo-Japanese  War,  was  that  the 


EFFECTS   ON   THE   MONEY   MARKET  177 

RATE  OF  INTEREST  AT  THE  BANK  OF  JAPAN  (MAIN  OFFICE),  1894-1903 l 


Revised  Date 


Days  of 
Contin- 
uance 


Interest  on 

Loans  and 

Discount 

on  Security 


Rate  of 

Discount 

of  City 

Bills 


Rate  of 

Discount 

of  Country 

Bills 


Interest  on 
Over- 
drafts 


Interest  on 

Corre- 
spondence 


January      22,1894 17 

February      8,     "     130 

June             18,     "     38 

July             26,     "     350 

July             12,  1895 423 

September    7,  1896 280 

June            14,  1897 58 

August        ii,     "     73 

October      23,     "    109 

February      9,     "     33 

March         14,     "     208 

October         8,  1898 60 

December     7,  1898 65 

February     10,  1899 29 

March         n,     "     32 

April            12,     "     107 

July             28,     "     105 

February     10,     "     17 

February    27,     "     22 

December  19.    "     9i 

March         20,  1900 29 

April            18,     "     91 

July             18,    "     609 

March         19,1902 100 

June            27,     "     98 

October        3,     "     67 

December     9,     "     99 

March         18,  1903 472 


Sen 
1.8 
1.9 
2.0 
2.0 

2.0 
2.O 

2.7  • 
2.3  b 

2.7  • 
2.4" 
2.7* 
2.5b 

2.8  » 
2.6b 

2.9» 
2.7  b 
2.7* 
2.5" 

2.5' 

2.3  b 

2.4* 


2.O  b 


5  n 


1. 9' 

2.  I 
2  .2 

2.4 

2.6 

2.7 

2.5 

2.3 

2.  I 

1-9 
1.7 


Sen 

2.O 
2.  I 
2.O 
2.3 
2.2 
2.3 

2.3  b 
2-4b 

2.5" 

2.6b 

2.7  b 

2.5b 

2.3  b 

2.2  b 
2.2  b 
2.O  b 

1  .9  b 
2.O  b 

2  .2 
2.2 
2.4 
2.6 

2.7 

2.5 

2.3 

2  .  I 
2.O 
19 


Sen 

2.O 
2.1 
2.2 
2.3 
2.2 
2.3 
2-5  b 

2.6b 

2.7  b 
2.8b 

2.9  b 

2.7b 

2.5  b 

2.4» 
2.  2  b 

2.1  b 

2.2  b 
2.1  b 

2.3 
2.4 
3.6 
2.8 

2.9 
2.7 

2.5 

2.3 

2.  I 

1-9 


Sen 
2.2 

2.3 
2.2 

3-3 

2.5b 
2.6" 
2.7b 
2.8b 
2.pb 

2.7  b 

2.5b 

2.4* 

2.2  b 
2.1  b 
2.2b 
2.1  b 

2-3 
2-4 
2.6 
2.8 
2.9 
2-7 
2.5 

2.3 

2.1 
19 


»  Individual.  b  Bank. 

RATE  OF  INTEREST  IN  TOKYO  AT  ASSOCIATED  BANKS,  1894-1903 


Cal- 
endar 
Year 


Daily  Rate  of 

Interest  on 

Loans 


Daily  Rate  of 
Discount 


Daily  Rate  of 
Interest  on  Cur- 
rent Deposits 


Daily  Rate  of 

Interest  onTime 

Deposits 


1894..  . 
1895..  . 
1896... 
1897..  . 
1898..  . 
1899.-  . 
1900. .  . 
1901..  . 
1902..  . 
1903-.  - 


Max. 


Sen 

2.96 

2.93 

2.93 

3.26 

3-34 

2.93 

3.40 

3-70 

3-30 

3-70 


Min. 


Sen 

2.13 

2.32 

2.28 

2.55 

2.75 

2.OO 
2.43 
3.02 
2.OO 


Aver- 


Sen 
2.54 
2.63 
2.54 
2.79 
3.09 
2.44 
2.98 
3.24 
2.83 
2.35 


Max. 


Sen 

3-70 

3-23 

3-00 

3-19 
3.48 
3.10 
3.34 
4.19 
3-25 
3.50 


Min. 


Sen 

2.14 

2.32 

2.25 

2.53 

2.67 

1.89 

2.33 

2.89 

1 .80 

1 .40 


Aver- 
age 


Max. 


Sen 
2.64 
2.71 
2.59 
2.83 
3.13 
2.31 
2.90 
3.18 
2.67 


Sen 
.15 
.23 
.31 
.50 
.84 

•  79 
.80 
.82 

•  79 
.60 


Min. 


Sen 
i.79 
0.92 
0.98 
0.99 
I.3I 
1 .20 
1.33 
1.62 
0.50 
0.30 


Aver- 
age 


One 

Month 


Sen 

0.97 

,06 

IS 
27 
64 
46 
62 
74 

70 


Per  Cent 


46 
5  93 
6.05 
6.44 
7-35 
6.62 
7.19 
7.56 
7.06 
6.00 


Two 
Months 


Per  Cent 
4-27 
4-77 
4-94 
5-31 
6.43 
5-93 
6.71 
7.10 
6.62 
5.56 


Three 
Months 


Per  Cent 
4.91 
5-37 
5-49 
5.89 
6.97 
6.26 
7.03 
7.38 
6-93 
5-83 


1  Daily  interest  is  to  be  calculated  per  100  yen.     If  not  a  leap  year,  3  sen  per 
diem  becomes  10.95  yen,  or  10.95  Per  cent  Per  annum. 


13 


178       WAR   AND   ARMAMENT   LOANS:   ECONOMIC    EFFECTS 
RATE  OF  INTEREST  FOR  THE  WHOLE  COUNTRY,  1894-1903 


Interest  on  Loans  • 

Daily  Rate  of  Discount  b 

Interest  on  Time  Deposits" 

Calendar 

Year 

Max. 

Min. 

Average 

Max. 

Min. 

Average 

Max. 

Min. 

Average 

Per 

Per 

Per 

Per 

Per 

Per 

Cent 

Cent 

Cent 

Sen 

Sen 

Sen 

Cent 

Cent 

Cent 

1894- 

I3-8S 

8.83 

3-97 

2  .69 

5.54 

3.38 

1895. 

I3-9S 

9.21 

4.02 

2.83 

5.8i 

3-86 

1896. 

13.92 

8.95 

3.93 

2.76 

6.  14 

4-05 

1897. 

13.86 

9.68 

4-05 

2.83 

6.47 

4.20 

1898. 

14-50 

10.46 

5.20 

3.20 

7.50 

4-95 

1899. 

12.90 

8.80 

10.46 

3.78 

2.51 

3-05 

6.90 

5.70  ' 

(>.2& 

1900. 

14.10 

9.80 

12.15 

4.00 

2.79 

3-47 

7.50 

5.90 

6.79 

1901. 

14.40 

1  1.  60 

13.09 

4.06 

3-35 

3-70 

7-50 

6.80 

7.23 

1902. 

13.90 

10.00 

12.09 

3-93 

2.78 

3  39 

7.60 

6.30 

6.96 

1903. 

12.60 

9.00 

10.90 

3-45 

2-43 

2.91 

6.90 

5.50 

6.15 

goods. 

b  The  daily  rate  of  discount  is  the  rate  on  city  bills  discounted  worth  100  yen. 

"  The  daily  rate  on  time  deposits  is  the  annual  rate  of  interest  on  loans,  with  the  term  fixed  at  six 
months. 

rice  crop  was  abundant;  the  amount  of  foreign  trade  showed 
over  606,000,000  yen;  the  money  interest  was  below  5  per  cent 
per  annum;  the  money  market  became  more  and  more  sluggish, 
and  the  subscription  of  company  debentures  came  into  vogue. 

At  the  outbreak  of  the  war  more  than  90  per  cent  of  the  war 
expenditures  was  covered  by  domestic  and  foreign  war  loans. 
The  loans  floated  in  the  domestic  money  market  were  tempo- 
rary loans  for  the  replenishment  of  armament,  extraordinary 
loans  for  the  construction  of  warships  and  other  vessels,  ex- 
traordinary affairs  expenditures  loans  and  Treasury  bills,  total- 
ling 200,000,000  yen  in  round  figures.  , 

The  issues  took  place  in  1904-1905  and  gave  rise  to  the  in- 
creased issue  of  convertible  notes,  and  burdened  the  domestic 
market.  In  the  second  place,  the  issues  of  exchequer  bonds 
during  1904  amounted  to  200,000,000  yen  and  those  during 
1905  amounted  to  280, 000,000  yen.  The  average  sum  monthly 
absorbed  by  the  national  Treasury  out  of  the  money  market  is 
calculated  at  126,000,000  yen.  The  outbreak  of  war  had  been 
anticipated  as  early  as  October,  1903,  when  the  negotiations 
with  Russia  threatened  diplomatic  rupture.  The  money 
markets  both  of  Tokyo  and  of  Osaka  began  the  withdrawal  of 
funds,  and  the  rate  of  interest  was  raised  by  3  rin  per  diem  in 


EFFECTS    ON   THE   MONEY   MARKET  179 

order  to  decrease  the  demand  for  funds.  Therefore,  when  the 
declaration  of  war  was  made  in  February,  1904,  no  bank  at- 
tempted to  raise  the  rate  of  interest.  In  June  of  the  same 
year,  however,  the  i3Oth  Bank  of  Osaka  suspended  payment, 
which  was  followed  by  a  run  on  various  banks  in  Osaka. 
The  Bank  of  Japan  raised  the  rate  of  interest  by  2  rin  per  diem 
on  July  i.  On  the  other  hand,  the  subscription  of  foreign 
loans  amounted  to  a  formidable  sum,  totalling  820,000,000 
yen  in  round  numbers,  during  the  period  ranging  from  May, 
1904,  to  July,  1905,  which  was  raised  by  the  first  and  second  6 
per  cent  loans  and  fhe  first  and  second  4.5  per  cent  loans.  In 
order  to  have  the  fund  obtained  by  these  loans  transmitted  to 
Japan,  there  was  an  increased  issue  of  convertible  notes. 
Our  economic  situation  was  greatly  relieved  by  the  Russian 
surrender  of  Port  Arthur  in  January,  1905,  and  the  interest 
showed  a  decline.  The  great  victory  at  Mukden,  followed  by 
the  decisive  battle  on  the  sea  of  Japan,  animated  the  popular 
spirit  and  the  stock  market  experienced  a  boom  trade  and  in- 
dustry became  active  which,  together  with  a  rise  of  prices, 
called  forth  a  demand  for  funds.  Money  circulation  became 
gradually  tight,  and  the  rate  of  interest  in  1905  was  higher 
than  that  of  the  preceding  year. 

The  treaty  of  peace  signed  on  September  5,  1905,  fell  short 
of  the  expectation  of  the  nation,  which  gave  rise  to  the  de- 
pression of  popular  feelings  and  discouraged  the  enterprises 
which  had  just  been  stimulated.  Demand  for  money  came  to 
a  standstill.  In  November,  1905,  a  4  per  cent  sterling  loan 
amounting  to  244,000,000  yen  was  raised.  The  exchequer 
bonds  bearing  high  interest,  which  were  to  have  been  con- 
verted and  redeemed  out  of  this  flotation,  were  converted  into 
a  domestic  extraordinary  military  expenditures  loan.  The 
greater  part  of  the  fund  raised  by  foreign  loans  was  equivalent 
to  a  new  subscription;  the  interest  rate  was  thus  declining. 
Simultaneously  with  this  various  private  companies  imported 
foreign  capital,  and  local  self-government  bodies  also  intro- 
duced enormous  foreign  funds.  These  also  played  an  impor- 
tant part  in  the  expansion  of  domestic  money  circulation. 


l8O       WAR   AND   ARMAMENT   LOANS:   ECONOMIC   EFFECTS 

Encouraged  by  the  plentiful  supply  of  funds  on  the  one 
hand,  and  by  the  enthusiasm  for  new  enterprises  on  the  other, 
the  monetary  world  after  the  war  fostered  the  enterprising 
spirit.  This  spirit  manifested  itself  in  the  stock  market  in  the 
latter  half  of  1906.  Simultaneously  an  increase  of  capital  was 
planned  in  various  companies,  such  as  cotton-spinning  com- 
panies, sugar-manufacturing  companies,  fertilizer  companies, 
etc.  The  hydro-electric  industry  made  its  first  appearance. 
The  subscription  to  the  99,000  shares  (100  yen  per  share)  of- 
fered by  the  South  Manchuria  Railways  Company  at  its 
establishment  reached  1078  times  as  much  as  the  amount 
offered.  From  that  time  forward  the  mania  for  new  enter- 
prises grew  more  and  more,  and  was  manifested  in  many  simi- 
lar phenomena  in  every  field,  the  number  of  new  projects  in 
1907  being  quite  beyond  enumeration. 

The  reaction,  however,  came  through  the  slump  of  shares 
and  stock  in  January,  1907.  In  February  of  the  same  year  an 
ominous  cloud  appeared  in  Nagoya  and  its  neighborhood, 
which  advanced  to  Tokyo.  In  March  several  dealers  in  sugar 
in  Tokyo  and  Yokohama  became  insolvent.  In  April  the  in- 
terest tightened  by  one  rin  or  two  rin  per  diem.  In  May  a 
revulsion  came  in  the  money  markets  of  the  Kyushu,  and  a 
new  relief  movement  appeared.  In  October  the  panic  which 
occurred  in  America  dealt  a  severe  blow  to  our  commerce  with 
America,  and  the  stringency  of  money  circulation  grew  more 
and  more. 

The  government  again  tried  to  mitigate  it  by  the  flotation  of 
foreign  loans.  In  March,  1907,  it  tried  to  float  the  remainder 
of  the  4  per  cent  sterling  loan  amounting  to  £25,000,000. 
The  changed  situation  in  Europe  did  not  favor  this  project, 
and  the  government  was  thrown  back  upon  the  flotation  of  5 
per  cent  bonds,  amounting  to  224,000,000  yen.  By  the  flota- 
tion of  this  loan,  6  per  cent  foreign  bonds  amounting  to  £22,- 
000,000  were  converted.  Thenceforward,  in  order  to  main- 
tain the  credit  of  our  national  loans,  the  government  first 
converted  5  per  cent  domestic  loans  by  three  issues  of  4  per 
cent  domestic  loans,  totalling  278,000,000  yen,  in  February  and 
March  of  1910.  Moreover,  the  sum  to  be  transferred  to  the 
sinking  fund  was  augmented.  In  April  and  May  the  conver- 


EFFECTS  ON  THE  MONEY  MARKET 


181 


sion  of  5  per  cent  domestic  loans,  including  the  war  loan,  ex- 
chequer bonds,  navy  loan,  etc.,  was  effected  by  the  flotation  of 
4  per  cent  French  and  sterling  loans,  totalling  282,000,000  yen. 
By  this  expedient  not  only  were  domestic  loans  converted  into 
foreign  loans,  but  there  was  also  an  increase  of  the  amount  of 
public  indebtedness  on  account  of  the  lowness  of  the  issue  price 
of  the  loans.  Thus,  in  1910  and  1911,  a  temporary  sluggish- 
ness in  money  circulation  came  about,  attended  with  a  low 
rate  of  interest.  Nevertheless,  owing  to  the  inflation  of  con- 
vertible notes,  prices  suddenly  went  up,  stimulating  bubble 
enterprises.  Soon  afterwards  stringency  of  money  circulation 
was  brought  about,  which  prevented  the  execution  of  govern- 
ment works  and  repressed  private  undertakings.  Financial 
and  economic  development  was  checked,  and  there  was  noth- 
ing for  it  but  to  resort  to  the  adjustment  of  public  finance  in 
order  to  bring  about  the  contraction  of  currency  and  the  fall  of 
prices,  and  thus  to  regulate  the  monetary  circulation.  It  was 
at  this  moment  that  the  present  reign  commenced.  The 
following  table  shows  the  fluctuations  of  interest  from  the 
Russo-Japanese  War  to  1912: 

FLUCTUATION  IN  RATE  OF  INTEREST  AT  THE  BANK  OF  JAPAN  (MAIN  OFFICE), 

1904-1914 l 


I  nterest  on 

Revised  Date 

Days  of 
Continuance 

Loans   and 
Rate  of 
Discount  on 
Security 

Rate  of 
Discount  of 
City  Bills 

Rate  of 
Discount  of 
Country  Bills 

Interest  on 
Overdrafts 
and  Corre- 
spondence 

Sen 

Sen 

Sen 

Sen 

July               2,  1904. 

170 

•  90 

.80 

.10 

.  10 

December   19,     "    . 

179 

.  10 

.00 

30 

-30 

June            16,  1905  . 

270 

-30 

.00 

-SO 

-50 

March         13,  1906. 

49 

.10 

.00 

-30 

30 

May               i,     "     . 

6 

.90 

.80 

.10 

.10 

July               i,     "     . 

521 

.90 

.80 

.10 

.  10 

December   14,  1907. 

517 

.20 

.00 

-30 

-30 

May              4,  1909. 

IOI 

.OO 

.80 

.10 

.  10 

August        13,     "     . 

151 

.80 

.60 

.90 

-90 

January       n,  1910. 

55 

.60 

.40 

-SO 

.70 

March           7,     "     . 

569 

.40 

•  30 

-30 

-So 

September  27,  1911 

90 

.60  m 

.50 

.50 

.70 

January         i,  1912. 

37 

.60  » 

-50 

-50 

.70 

February       7,     "     . 

238 

.70* 

.60 

.60 

.80 

October         2,  1913. 

43 

.8o» 

-70 

-70 

.00 

November    14.  "    . 

599 

.90* 

.80 

.80 

.10 

July               6,  1914. 

.10  • 

.00 

.00 

•  30 

Minimum  rate. 


1  Loans  and  discount  on  security  after  May,  1906,  show  loans  and  discount  rate 
on  security  other  than  national  loan  bonds.  Interest  on  loans  and  rate  of  discount 
on  national  loan  bonds  security  are  one  rin  lower. 


1 82       WAR   AND   ARMAMENT   LOANS:    ECONOMIC   EFFECTS 
RATE  OF  INTEREST  IN  TOKYO,  1904-1913 


Daily  Rate  of 

Daily  Rate  of 

Daily  Interest  on 

Interest  on  Time 

Cal- 

Interest  on  Loans 

Discount 

Current  Deposits 

Deposits 

cndcir 
Year 

Max. 

Min. 

Aver- 
age 

Max. 

Min. 

Aver- 
age 

Max. 

Min. 

Aver- 
age 

One 

Month 

Two 
Months 

Three 

Months 

Sen 

Sen 

Sen 

Sen 

Sen 

Sen 

Sen 

Sen 

Sen 

Per  Cent 

Per  Cent 

Per  Cent 

1904. 

3-70 

.10 

2.33 

3-40 

1-45 

2.  16 

.60 

0.30 

0.97 

5-75 

5-40 

5-54 

1905. 

3  -SO 

.60 

1.52 

3-50 

i  .60 

2.40 

.70 

0.30 

I  .01 

5-95 

5.58 

5-73 

1906. 

3-SO 

.60 

2-39 

3-50 

1.40 

2.  l6 

.70 

0.30 

0.95 

5-79 

5.41 

5-55 

1907. 

3-50 

•  70 

2-35 

3-20 

i  .60 

2.17 

.80 

0.30 

0.91 

5.60 

5-23 

5-41 

1908. 

3-50 

.80 

2.63 

3-50 

i.  80 

2.54 

.90 

0.30 

i  .02 

6.18 

5.8a 

6.02 

1909. 

3-SO 

.20 

2.36 

3-40 

o.9S 

2.09 

.70 

0.50 

0.89 

5.68 

5.22 

5.48 

1910. 

3-30 

.70 

1-99 

3.10 

0.85 

1.58 

.30 

0.30 

0.64 

4-63 

4-25 

4-43 

1911. 

3-30 

.75 

1.93 

3.20 

i  .00 

i  .62 

•  50 

0.30 

0.64 

4.51 

4.14 

4-34 

1912. 

3-30 

.00 

2.15 

3-50 

1.30 

1.99 

.80 

0.30 

0.86 

5-45 

5.O2 

5-30 

1913- 

3-30 

.60 

2-45 

3-20 

1.  60 

2.30 

.80 

0.50 

I  .01 

6.  20 

5-85 

6.09 

RATE  OF  INTEREST  FOR  THE  WHOLE  COUNTRY,  1904-1912 


Interest  on  Loans 

Daily  Rate  of  Discounts 

Interest  on  Time  Deposits 

Calendar 

Year 

Max. 

Min. 

Average 

Max. 

Min. 

Average 

Max. 

Min. 

Average 

Per  Cent 

PerCent 

Per  Cent 

Sen 

Sen 

Sen 

Per  Cent 

Per  Cent 

Par  Cent 

1904. 

12.3 

9-0 

10.74 

3-39 

2.48 

2.94 

6.4 

5-6 

5-98 

1905. 

12.6 

9-3 

1  1.  02 

3-44 

2.57 

3.01 

6.5 

5.7 

6.08 

1906. 

12.4 

8.4 

10.27 

3.36 

2.25 

2.77 

6-5 

5.5 

5-93 

1907. 

II.  5 

8.3 

9.92 

3.16 

2.23 

2.65 

6.2 

5-4 

5-72 

1908. 

12.2 

9.2 

10.79 

3-33 

2.47 

2.94 

6.6 

5-5 

6.08 

1909. 

II.  9 

8.2 

IO.OO 

3.23 

2.07 

2.67 

6.6 

5.3 

5.82 

1910. 

10.7 

7.i 

8.70 

2.87 

1-79 

2.28 

5-8 

4-4 

4-97 

1911. 

10.3 

7-0 

8.36 

2.73 

1.78 

2.  2O 

5-i 

4-4 

4-72 

1912.. 

II.  2 

7-5 

9.00 

3-10 

1.98 

2.41 

6-3 

4-6 

5.20 

EFFECTS  ON  THE  SPECIE  RESERVE  ABROAD 

In  July,  1877,  the  government  deposited  in  public  offices 
stationed  abroad,  or  in  foreign  banks,  the  foreign  coins  (specie) 
which  had  been  received  abroad.  This  fund  was  to  be  ap- 
propriated to  the  repayment  of  the  principal  and  interest  of 
foreign  loans,  the  purchase  of  warships,  or  to  the  expenditures 
of  government  offices.  Further,  gold  and  silver  bullion  was 
purchased  with  this  fund  in  the  foreign  market;  sometimes  it 
was  transmitted  home  by  bills  of  exchange.  This  was  called 
"the  foreign  deposit  in  the  reserve  fund  section  in  the  national 
Treasury, "  and  was  the  first  attempt  on  the  part  of  the  gov- 
ernment to  accumulate  specie  abroad.  Just  then  the  amount 


EFFECTS   ON    THE   MONEY   MARKET  183 

of  receipts  abroad  was  very  scanty  and  was  inadequate  to  meet 
foreign  disbursements.  With  the  enactment  of  the  foreign  ex- 
change law,  October,  iSSo,1  the  fund  suddenly  increased.  In 
accordance  with  the  object  for  which  it  established  the  Yoko- 
hama Specie  Bank,  the  government  deposited  with  the  bank 
paper  money  amounting  to  3,000,000  yen,  which  was  set  apart 
to  serve  as  the  fund  for  foreign  documentary  bills.  The  pro- 
ceeds of  the  sale  of  such  bills  abroad,  received  in  specie,  went 
to  the  reserve  fund,  the  object  being  the  patronage  and  en- 
couragement of  direct  exporters  on  one  hand,  and  on  the  other 
the  saving  of  any  special  remittances  in  order  to  repay  foreign 
loans  or  to  disburse  miscellaneous  expenses  of  the  public  offi- 
cers stationed  abroad.  In  1882  this  regulation  was  revised  by 
the  New  Foreign  Documentary  Bill  Regulation,  by  which  the 
machinery  of  foreign  exchange  was  extensively  readjusted. 
With  the  enactment  of  a  regulation  in  1 884  with  regard  to  the 
drawing  of  bills  of  exchange  by  foreigners  the  system  of  foreign 
exchange  was  brought  to  completion.  The  main  object  of  en- 
couraging foreign  exchange  by  advances  out  of  the  govern- 
ment reserve  fund  lay  in  obtaining  specie  abroad.  The  gov- 
ernment proposed  to  accomplish  this  by  changing  paper  money 
into  bills  of  exchange.  The  paper  money  in  the  reserve  fund 
consequently  witnessed  a  great  decrease,  and  in  1888  it  was 
unable  to  meet  the  drawing  of  documentary  bills.  An  expe- 
dient was  resorted  to  whereby  the  fund  to  be  paid  abroad  from 
the  general  account  should  be  utilized  for  the  documentary 
bills.  The  documentary  bills  of  the  direct  exporters,  however, 
were  not  infrequently  delayed  in  the  repayment  abroad,  thus 
causing  great  inconveniences  to  the  government.  The  utili- 
zation of  documentary  bills  on  the  part  of  direct  exporters  was 
abolished  in  1888. 

The  foreign  deposits  of  public  offices  abroad  had  hitherto 
been  made  in  branch  or  detached  offices  of  the  Yokohama 
Specie  Bank  or  reliable  foreign  banks.  When,  however,  the 
branch  or  detached  offices  of  .Yokohama  Specie  Bank  came 
gradually  to  be  established  in  Europe  and  America,  the  whole 

1  Deposit  Fund  Regulation. 


184       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 


of  the  foreign  deposits  were  transferred  to  the  specie  bank 
(except  in  China),  and  the  specie  bank  was  charged  with 
the  disbursements  of  the  public  officers.  Thus,  with  the  re- 
peal of  the  regulation  relating  to  documentary  bills,  foreign 
deposits  were  also  abolished  in  1889,  and  the  final  settlement 
was  accomplished  in  March,  1890.  The  total  amount  of  the 
receipts  and  disbursements  from  July,  1877,  to  July,  1890, 
was  calculated  at  86,003,719  yen,  itemized  in  the  following 
table: 

RECEIPTS  AND  DISBURSEMENTS,  JULY,  i877~JuLY,  1890 


Items 

Receipts 

Items 

Disbursements 

Repayment  for  advance 
on  documentary  bills 
Proceeds    of    rice    and 
laminaria     (seaweed) 
belonging  to   reserve 
fund 

Yen 
65,161,431 

6,661,033 

9,565,011 
408,405 

Payment  of  principal 
and  interest  of  for- 
eign loans  by  ex- 
change bills 

Yen 
19,771,640 

2,821,839 

32,892,297 
4,899,850 
80,600 

140,994 

Payment  for  purchase 
of  warships  and  other 
expenditures  of  gov- 
ernmental office  by 
exchange  bills  

Receipt  for  payment  of 
unfavorable  exchange 
rate  

Interest  on  deposits.  .  . 
Total  

Payment  for  purchase 
of  gold  and  silver 
bullion  

81,694,871 
4,308,848 

Money     transmitted 
from  Japan  

Money  transmitted  to 
Japan  .  . 

Grand  total    .  . 

Miscellaneous  expend- 
itures . 

86,003,719 

Lost  payment  and 
money  transferred 
to  perpetual  loan 
account  

Total  

86,003,719 

After  the  abolition  of  the  deposits  abroad  the  government 
received  from  China  the  aggregate  sum  of  355,980,000  yen,  in 
round  numbers,  including  the  indemnity  for  war  expenditures 
and  compensation  for  the  retrocession  of  the  Liaotung  Penin- 
sula. The  payment  of  the  sum  was  made  in  London  in  Eng- 
lish currency  in  several  instalments.  Upon  the  receipt  of  each 
instalment  it  was  placed  in  the  custody  of  the  London  branch 
of  the  Yokohama  Specie  Bank,  which  acted  as  the  agent  of  the 
Bank  of  Japan.  Thus  the  question  of  specie  abroad  sprang  up 


EFFECTS   ON    THE   MONEY   MARKET 


185 


again.     The  appropriations  of  this  indemnity  may  be  sum- 
marized in  the  four  items  following : 

1.  The  portion  appropriated  for  purchase  prices  payable 
abroad  for  warships,  rails,  etc. 

2.  The  portion  of  the  indemnity  which  was  to  be  appro- 
priated to  domestic  expenditures.     This  was  to  be  transmitted 
to  Japan  in  English  coins,  bar  gold  or  silver,  or  by  exchanges, 
according  to  the  circumstances  of  the  money  market. 

3.  If  the  condition  of  the  money  market  was  inopportune, 
the  portion  which  was  to  be  transmitted  to  Japan  was  to  be 
deposited  with  our  London  agent  of  the  Bank  of  Japan  in  ster- 
ling coins.     The  Bank  of  Japan  was  directed  to  issue  convert- 
ible bank  notes  on  the  security  of  this  reserve.     The  govern- 
ment borrowed  and  employed  the  notes  pro  tempore.     The 
English  coins  were  gradually  exchanged  for  our  currency,  and 
paid  back  to  the  Bank  of  Japan. 

4.  The  remaining  portion,  which  was  appropriated  to  the 
annual  expenditures  or  other  purposes,  was  preserved  in  the 
form  of  reliable  bonds,  etc.,  or  deposited  with  the  Bank  of 
Japan  for  interest,  according  to  the  condition  of  the  money 
market. 

RECEIPTS,  DISBURSEMENTS  AND  BALANCES,  OCTOBER    iSgs-MARCH,  1903 l 


Calendar  Year 

Receipts 

Disbursements 

Remaining  Sum 
(Specie  Abroad) 

1895.  . 

£  s.  d. 

IT,,  1  6O,  ^02  .O^.OO 

£  5.  d. 

£  s.  d. 
I'*.i6o,'*o2.o';.oo 

1896. 

O.^^S,61>'t  O^.o6 

l8,2O5,54Q  l6.OO 

4,200.405.10.06 

1897  

7.96^,98l.I2.O^ 

IO,I5I,22O.O2.O2 

2,103,257.00.07 

1898.  . 

I   ^.607.444.10.00 

I  S,  27O.4OQ.OQ.  O2 

440,292.11.02 

1  800  .  . 

Q.  100.006.  08.  OQ 

O.IS8.664  I^.OS 

480.6^4.06.0^ 

1900  

S72.447.I7.O7 

I.O59,'t57.I'l.OI 

-155.777.10.10 

I9OI  .  . 

78,l85.l6.0lb 

166,138.19.06  c 

44^.^^0.14.01 

IQO2  .  . 

74^.002  06  oo 

I,O2O  813  08  OI 

165  609.12.00 

I9(na.  . 

1,108,356.00.00 

I4I,IOI.O2.O8 

1,132,864.09.04 

Total  

55.684.260.07  O4. 

54.551  4O4  1  8  OO 

22  572  25-;.  17.09 

•  Until  March  only. 


b  Loss  in  receipts. 


:  Withdrawal  of  disbursements. 


1  This  table,  which  is  based  on  the  Financial  History  of  Meiji  Era,  vol.  II,  shows 
the  total  amount  of  receipts,  disbursements  and  balances  at  the  date  when  dis- 
bursements were  actually  made  in  London,  in  English  money.  They  are  not  in 
accord  with  figures  in  the  books  kept  in  the  national  Treasury.  See  text  on  fol- 
lowing page. 


1 86       WAR   AND   ARMAMENT   LOANS:   ECONOMIC   EFFECTS 

At  that  time  the  government  decided  to  adopt  the  gold 
standard  system,  and  no  small  amount  of  this  indemnity  was 
transmitted  to  serve  as  a  specie  reserve.  Moreover,  in  April, 
1899,  the  first  4  per  cent  foreign  loan1  was  floated  which,  to- 
gether with  the  sale  of  domestic  loans,  made  the  receipt  of 
specie  mount  up  to  a  big  sum.  The  balance  of  the  receipts 
and  disbursements  of  the  indemnity  and  the  fund  raised  by 
foreign  loans  constitute  the  specie  reserve  abroad.2 

The  specie  abroad  after  the  Sino- Japanese  War  was  based, 
in  the  main,  upon  the  receipts  and  disbursements  of  the  in- 
demnity, but",  since  the  fund  raised  by  the  public  undertakings 
loans  and  the  proceeds  of  the  sale  abroad  of  the  war  loans  also 
augmented  specie  abroad,  the  specie  abroad  may  be  said  to 
have  some  connection  with  the  war  and  armament  loans. 

During  the  Russo-Japanese  War  the  government  floated 
foreign  loans  amounting  to  82,000,000  yen.  In  the  fiscal  year 
1910,  282,000,000  yen,  in  round  numbers,  was  floated  in  the 
English  and  French  markets  for  the  conversion  of  loans  into  4 
per  cent.  With  regard  to  the  transmission  and  the  appropria- 
tion of  these  foreign  loans  the  government  seems  to  have  en- 
tered into  some  secret  agreement  with  foreign  capitalists.  It 
was  believed  that  the  government  was  not  only  forbidden  to 
have  the  fund  transmitted  in  specie,  but  also  was  subject  to 
the  obligation  always  to  deposit  a  certain  amount  of  specie  in 
foreign  banks  as  security  for  foreign  interest.  The  specie  in 
question  was  not  only  appropriated  to  the  repayments  and 
payments  of  principal  and  interest  of  national  loans,  purchase 
of  warships  and  torpedo  boats  and  other  government  dis- 
bursements, but  was  delivered  to  the  Bank  of  Japan  to  serve 
as  specie  reserve,  in  exchange  for  which  bank  notes  were  is- 
sued in  order  to  meet  the  domestic  payments.  Furthermore, 
the  specie  received  by  the  flotation  of  public  loans  and  deben- 
tures in  the  foreign  market  was  delivered  to  the  Bank  of  Japan 
to  enable  the  bank  to  replenish  the  specie  abroad. 

Hereupon,  the  specie  abroad  was  divided  into  (a)  specie 
abroad  owned  by  the  government  and  (6)  specie  abroad  owned 
by  the  Bank  of  Japan.  The  specie  amounted  to  a  formidable 

1  For  national  defense  and  public  work.  *  See  table  on  preceding  page. 


EFFECTS   ON   THE   MONEY   MARKET 


I87 


sum,  and  its  increase  and  decrease  exerted  no  small  influence 
upon  the  economic  world. 

GOVERNMENT-OWNED  SPECIE  ABROAD,  1904-1913' 


Year 

Amount 

Year 

Amount 

I9O4..  . 

Yen 
147,000,000 

1909  

Yen 
23,000,000 

IPO^.  . 

209,000,000 

1910  

138,000,000 

1006  .  . 

229,000,000 

IQII  .  . 

133,000,000 

IQO7  .  . 

71,000,000 

IQI2  .  . 

88,000,000 

1008  .  . 

96,000,000 

IQIV  . 

84,000,000 

Average   of   the   above 
five  years  

150,000,000 

Average  of  the  above 
five  years  

93,000,000 

According  to  the  publication  of  the  government  in  the 
thirty-first  session  of  the  Diet  the  existing  amount  of  specie 
on  December  31,  1913,  was  as  shown  in  the  following  table, 
which  contains  the  amount  and  whereabouts  of  specie  abroad. 


AMOUNT  OF  SPECIE,  DECEMBER  31,  1913 


Yen 

Owned  by  national  Treasury 86,000,000 

Owned  by  Bank  of  Japan 285,000,000 


Yen 


Total . 


371,000,000 


At  home 130,000,000 

Abroad : 

In  England 204,000,000 

"  France 26,000,000 

"  America 7,000,000 

"  Germany  ....       4,000,000 

241,000,000 


Total 371,000,000 

The  existence  of  the  specie  abroad  is  due  to  the  expansion 
of  international  indebtedness  which  made  it  both  necessary 
and  convenient  to  keep  specie  abroad  by  way  of  foreign  dis- 
bursement. This,  however,  deprived  convertible  notes  within 
the  country  of  elasticity.  The  unfavorable  balance  of  trade 
did  not  contract  convertible  notes,  and  prices  went  up  instead 
of  going  down.  Importation  of  goods  was  encouraged  and  ex- 
portation declined,  thus  increasing  our  international  indebted- 
ness. This  necessitated  the  constant  replenishment  of  specie 
abroad  in  order  to  provide  for  the  disbursement  of  national 
expenditures  and  to  protect  the  foreign  trade  and  exchange 
fund. 

1  Held  by  the  government  in  order  to  meet  foreign  disbursements.  The  specie 
possessed  by  the  Bank  of  Japan  was  greater  in  amount,  the  part  of  which  was 
employed  as  specie  reserve.  Its  variations  and  the  method  of  custody  are  not 
clear. 


1 88     WAR  AND  ARMAMENT  LOANS:  ECONOMIC  EFFECTS 

MONETARY  DISTRIBUTION  BETWEEN  CITY  AND  COUNTRY 

It  may  be  said  that  war  on  the  whole  brings  about  the 
prosperity  of  cities  at  the  expense  of  the  country,  because  war 
has  a  tendency  to  concentrate  capital  and  labor  in  the  former. 
Our  country  has  been  characterized  by  the  constant  centrali- 
zation of  financial  and  political  power  since  the  Restoration. 
After  the  Sino- Japanese  and  Russo-Japanese  Wars  monetary 
circulation  centered  in  cities  at  the  expense  of  the  country. 
For  instance,  during  the  Russo-Japanese  War  480,000,000 
yen  was  raised  from  every  district  of  the  Empire  by  five  issues 
of  exchequer  bonds,  thus  exhausting  the  resources  of  the  coun- 
try. Against  this,  820,000,000  yen  was  raised  by  the  flotation 
of  foreign  loans,  one-half  of  which  was  kept  abroad  in  order  to 
meet  the  foreign  disbursements  on  account  of  the  war.  The 
other  half  was  transmitted  home,  only  with  the  result  of  flood- 
ing the  upper  classes  in  the  central  cities  with  money.  No 
small  amount  of  the  money,  however,  flowed  out  to  the  scene 
of  action  or  to  foreign  countries,  partly  because  of  the  several 
issues  of  the  Treasury  bills  and  the  flotation  of  extraordinary 
military  expenditures  loans  amounting  to  310,000,000  yen,  and 
partly  because  of  payment  of  exchange  due  to  the  successive 
excesses  in  importation.  In  the  meanwhile  the  resources  of 
large  cities  became  abundant  through  the  employment  of  war 
loans  and  the  centralization  and  amalgamation  of  banks, 
through  the  expansion  of  industries  concerned  with  munitions 
of  war,  and  through  government  enterprises.  The  money 
circulation  of  the  provinces,  on  the  contrary,  had  little  share  in 
this  abundant  distribution  of  capital.  In  addition  a  ormid- 
able  amount  of  special  taxes  was  levied  on  several  occasions, 
to  the  exhaustion  of  provincial  resources.  As  a  result  the 
patriotic  loan  bonds  which  had  been  in  the  hands  of  provincials 
gradually  centered  in  the  cities. 

Thus  the  amount  of  public  loan  bonds  possessed  by  people 
of  the  capital  and  other  large  cities  greatly  increased,  while 
those  of  the  provinces  decreased.  When,  after  the  war,  the 
government  redeemed  the  war  loans,  either  out  of  the  continu- 


EFFECTS   ON    THE   MONEY   MARKET 


189 


ation  of  increased  taxation  or  by  means  of  conversion,  it  was 
quite  natural  that  the  money  delivered  as  repayment  and  pay- 
ment of  principal  and  interest  was  chiefly  absorbed  in  the 
capital  and  other  large  cities.  Thus,  while  the  financial  power 
tended  to  center  in  the  capital  and  in  other  large  cities,  the 
provinces  were  left  resourceless  and  without  any  prospect  for 
recovery,  which  caused  the  crippling  of  credit  and  the  depres- 
sion of  local  industries.  Now  let  us  glance  at  the  condition  of 
monetary  distribution  over  the  whole  country,  when  the  war 
came  to  an  end.  In  the  paid-up  capital  of  various  companies, 
or  in  the  distribution  of  national  loan  bonds,  or  in  the  compari- 
son of  the  existing  amount  of  bank  deposit,  some  eight  or  nine 
prefectures  that  could  boast  large  cities  appropriated  to  them- 
selves the  better  part  of  the  amount.  The  interest  rate  in 
large  cities  was  found  to  be  much  lower  than  the  average  inter- 
est rate  of  the  whole  country,  while  that  of  the  other  districts 
(twenty-nine  prefectures)  was  much  higher.  The  accompany- 
ing tables  show  various  resources  and  money  interest  of  Tokyo, 
Osaka,  Kyoto,  Yokohama,  Kobe,  Niigata,  Nagoya  and 
Fukuoka.  Comparison  is  made  with  those  of  the  whole  coun- 
try that  the  actual  condition  of  monetary  distribution  may  be 
clearly  shown. 


190       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 


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EFFECTS   ON    THE   MONEY   MARKET 
2. — DISTRIBUTION  OF  NATIONAL  LOAN  BONDS 


191 


Names  of  Prefectures 

End  of  1895 

End  of  1897 

End  of  1902 

End  of  1907 

End  of  1910 

Tokyo    

Yen 
160,560,829 

Yen 
169,558,407 

Yen 
235.549,008 

Yen 
434,141,681 

Yen 
511,227,210 

Osaka  

20,636,397 

23,188,495 

250,066,388 

104,403,035 

182,894,525 

Kyoto      

18,023,731 

16,791,968 

16,314,485 

33,703,491 

33,061,535 

Hyogo  

7,018,059 

8,196,186 

9,540,988 

14,290,584 

18,433,298 

54,630,880 

51,852  900 

5,480,325 

3,799,269 

3,448,035 

8,076,108 

10,485,450 

7,254,224 

6,654,159 

2,940,439 

2,059,904 

6,919,595 

19,917,527 

22,805  190 

Total  

231,454,992 

244,538,971 

305,730,809 

654,872,722 

812,326  810 

53,868,450 

55,233,050 

90,921,500 

114  795  975 

311,295,910 

320,889,528 

364,246,326 

793,611,685 

950,600,940 

Kight  prefectures  

74% 

76% 

83% 

82% 

85% 

Other  prefectures  

26% 

24% 

17% 

18% 

15% 

3. — DEPOSITS  OF  GOLD  AND  SILVER  IN  BANK* 


Calendar 
Year 

Tokyo 
Associated 
Banks 

Yokohama 
Associated 
Banks 

Osaka 
Associated 
Banks 

Nagoya 
Associated 
Banks 

Total 

Private  and 
National 
Banks  of 
Whole 
Country 

Ratio 

1897  
1898      .... 

Yen 

6,547,224 
7,665,354 

Yen 
2,501,731 

Yen 
4,232,195 
4,137,378 

Yen 
500,232 

Yen 
10,779,419 
14,804,695 

Yen 
40,779,369 
41  548  315 

Per  Cent 

25 

34 

1899    

7,792,797 

2,401,815 

5,457,149 

646,533 

16,298,294 

51,113,218 

31 

1900  

9,029,299 

3,636,747 

5,303,803 

753,855 

18,723,704 

53,889,175 

33 

1901  

11,045,080 

3,399,283 

5,500,470 

780,899 

20,725,732 

57,242,173 

35 

1902  

16,871,025 

3,202,125 

5,277,882 

869,488 

26,220,520 

65,012,154 

40 

1903    

19,723,075 

3,301,601 

7,454,057 

878,967 

31,357,700 

67  555  971 

46 

1904  

14,410,247 

4,807,788 

9,770,533 

911,244 

29,899,812 

75,239,354 

38 

1905  

22,408,429 

5,798,238 

!2,  157,  252 

1,154,279 

41,518,198 

84,873,050 

48 

1906 

28,879,819 

6,947  470 

12,  458,983 

1,959  55O 

50  245  822 

45 

1907      .... 

32,568,012 

7,114,832 

^2,  044,  519 

1,475  025 

53,202,388 

104  863  006 

50 

1908  

31,763,172 

5,876,665 

J3,  062,  535 

1,423,395 

52,125,767 

106,050,091 

49 

1909  

36,743,166 

6,420,416 

J6,  444,  076 

2,765,919 

62,573,577 

105,388,047 

59 

1910  

35,417,615 

6,550,147 

I8,  766,999 

2,081,495 

62,816,256 

111,667,228 

55 

1911        .  .  . 

30,310,006 

5,445,067 

16  126,747 

2,657,603 

54,539  423 

116  710  759 

46 

1  Based  on  Tokyo  Associated  Banks  Weekly,  Osaka  Associated  Banks  Weekly, 
Reference  Book  Concerning  Monetary  Affairs,  and  Imperial  Statistical  Year  Book. 


192       WAR   AND   ARMAMENT   LOANS :    ECONOMIC    EFFECTS 


4. — DISTRIBUTION  OF  BANK  DEPOSITS  1 
Ordinary  Bank 


Prefectures 

End  of  1895 

End  of  1897 

End  of  1902 

End  of  1907 

End  of  1911 

Tokyo            

Yen 
52,629,619 

Yen 
104,425,310 

Yen 
141,357,037 

Yen 
251,272,658 

Yen 

342,867,525 

5,903,761 

13,937,110 

17,167,212 

35,349,032 

43,514,644 

7,007,623 

20,725,441 

28,286,047 

50,646,014 

62,397,917 

Niigata    

2,627,744 

5,997,033 

10,179,770 

15,611,958 

21,285,128 

Kyoto            

8,666,859 

20,661,429 

27,191,280 

43,222,026 

57,648,713 

Osaka      

30,494,277 

56,402,804 

73,416,462 

125,094,197 

170,098,984 

7,135,877 

17,472,723 

30,916,154 

53,528,488 

77,176,741 

2,264,665 

7,845,179 

12,193,954 

19.450,108 

20,951,049 

Total         

116,730,425 

247,467,029 

340,707,916 

594,174,481 

795,940  701 

Total    for    the    whole 

167,430,573 

392,033,993 

536,702,802 

908,257,217 

1,256,247,545 

69% 

63% 

62% 

65% 

63% 

Other  prefectures  

3i% 

37% 

38% 

35% 

37% 

Further  Deposits  in  Tokyo 


50  760,774 

28  352,728 

100  686,354 

1  86  043  563 

247  688  021 

6,653,909 

78,109,995 

18,887,799 

220,286,956 

133,658  573 

Industrial  Bank  

1,108,213 

10,072,688 

4,780,800 

Total     

57,414,683 

106,462,723 

120,685,366 

406,403,207 

286,125,394 

Grand  total  for  the  8 
prefectures  including 
deposits  in  Tokyo  .  . 

174,145,108 

353,929.752 

461,393,284 

1,000,577,688 

1,182,066,095 

Grand    total    for    the 
whole    country    in- 
cluding  deposits   in 
Tokyo    

224,845,256 

498,496,716 

657,388,170 

1,314,660,424 

1,642,372,929 

Eight  prefectures  
Other  prefectures  

77% 

23% 

70% 
30% 

70% 
30% 

76% 
24% 

72% 

28% 

5. — MAXIMUM  AND  MINIMUM  RATES  OF  INTEREST  ON  BANK  LOANS,  IN 
DECEMBER  OF  EACH  YEAR2 


Prefectures 

December, 
1895 

December, 
189? 

December, 
1902 

December, 
1908 

December, 
1912 

Tokyo  

Per  Cent 
8.5-  9.5 

Sen 
2.79-3.19 

Per  Cent 
5.0-12.7 

Per  Cent 
6.7—12.7 

Per  Cent 
6.0-13.2 

8.9—10.6 

2  .  90—3  .  20 

6.0—13.0 

i  .0—13  .0 

5  .2—12  .O 

5.0-11  .0 

2  .  90—3  .  oo 

6.0—10.5 

8.4—10.0 

6.9—II  .3 

Kyoto  

8.O-I2.O 

2  .  6O-3  .  2O 

6.6-12.7 

7.5—12.0 

6.2-10.2 

Osaka           

9.  i—  ii  .5 

2  .  6O—3  .  50 

5  .0—12  .0 

5.0—12.2 

6.2—  12.  O 

Kobe   

9  .  5-1  I  .  7 

3  .  00-3  .  50 

6.2—  12.  O 

6.0—  ii  .0 

6.O—IO.5 

Niigata  

8.8-  9.5 

3  .  00-4  .  oo 

8.4-  9.5 

9.0-10.2 

8.2-  9.5 

9.0—12.0 

2  .  9O—4  .  OO 

10.0—13  .0 

9.9—11  .0 

7.5—  9.O 

Average     of     the     whole 
country  

9.3-13.3 

3  .  1  7-4  .  05 

io.b-12.6 

9.6—12.0 

8  .  2-1  i  .  a 

1  This  table  is  based  on  Imperial  Statistical  Year  Book. 

2  Based  on  Imperial  Statistical  Year  Book. 


CHAPTER  IV 
EFFECTS  ON  INDUSTRIES 

The  effects  of  war  and  armament  upon  industry  are  both 
immediate  and  conspicuous,  and  are  supported  by  facts  and 
statistics.  But  the  effects  of  the  issue,  redemption,  .etc.,  of 
war  and  armament  loans  upon  industry  are  not  so  direct  and 
immediate.  Inasmuch  as  the  issue  and  redemption  of  war 
and  armament  loans  exerted  an  influence  upon  prices  and 
monetary  circulation,  as  was  stated  before,  it  was  quite  natural 
that  these  changes  in  prices  and  monetary  circulation  in  turn 
should  have  some  effect  upon  foreign  commerce,  enterprises 
and  stocks.  Especially  in  the  Russo-Japanese  War  a  greater 
part  of  the  loans  were  floated  abroad.  The  introduction  of 
foreign  capital,  and  the  conversion  or  redemption  of  loans 
had,  therefore,  no  small  effects  upon  the  amount  of  foreign 
commerce,  enterprising  schemes  and  the  stock  market. 

EFFECTS  ON  FOREIGN  TRADE 

The  issue  and  conversion  of  war  and  armament  loans,  to- 
gether with  the  simultaneous  vicissitudes  of  enterprises,  and 
fluctuations  of  prices  and  of  monetary  circulation,  exercised  a 
very  great  influence  upon  our  foreign  commerce.  The  politi- 
cal changes  of  the  Restoration  terminated  the  national  isola- 
tion policy,  which  had  been  adopted  by  the  Tokugawa  Re- 
gency, and  established  a  policy  of  opening  the  country  to 
foreign  commerce.  This  brought  about  a  wonderful  change  in 
our  national  life  at  large,  and  for  one  thing  it  gave  rise  to  the 
demand  for  foreign  goods.  Especially  the  increased  issue  of 
the  government  paper  money  which  attended  the  civil  dis- 
turbances rapidly  pulled  up  prices  and  kept  up  the  excess  of 
importation  over  exportation  for  several  successive  years  with 
the  consequent  efflux  of  specie.  This  tendency  of  excess  of 
importation  temporarily  disappeared  in  1876.  When,  in  1877,, 
14  191 


194       WAR   AND    ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

the  Satsuma  Rebellion  occurred,  causing  increased  issue  of 
new  paper  money  and  bank  notes,  the  currency  was  remark- 
ably inflated,  general  prices  went  up  higher,  and  the  excess  of 
importation  and  the  specie  efflux  did  not  cease  until  1881. 

In  1 88 1  the  government  set  about  the  adjustment  of  paper 
money  and  the  curtailment  of  expenditures.  As  a  result  the 
currency  contracted,  and  prices  gradually  went  down.  No 
excess  of  importation  was  witnessed  until  1889,  and  specie 
tended  to  flow  in.  There  was  a  temporary  reaction  in  1890, 
when  there  was  an  excess  of  importation,  and  specie  flowed  out. 
In  1891,  however,  the  rice  crop  was  abundant,  and  there  was 
also  a  remarkable  depreciation  of  silver  currency,  which 
brought  about  a  great  excess  of  exportation  with  an  inward 
flow  of  specie,  which  state  of  things  continued  till  1893. 

In  1894  a  great  sum  of  temporary  loans  and  military  loans 
was  floated.  As  a  result  a  great  amount  of  convertible  notes 
was  issued  and  there  was  a  temporary  stringency  of  monetary 
circulation.  When,  as  a  result  of  successive  victories  of  our 
forces  both  on  land  and  sea,  the  reception  of  the  indemnity 
was  reported,  it  gave  rise  to  a  strong  enterprising  spirit  and  to 
the  increase  of  exportation.  The  importation  of  merchandise, 
however,  was  still  greater.  In  1899  the  expansion  of  the 
security  reserve  of  the  Bank  of  Japan  brought  down  the  rate 
of  money  interest.  In  1900  in  connection  with  the  Boxer 
Uprising  there  was  an  increased  issue  of  convertible  notes 
which  brought  up  prices.  The  excess  of  importation,  never- 
theless, increased  every  year.  The  existence  of  the  indemnity 
fund  brought  about  an  influx  of  specie,  and  prices  continued 
to  rise.  The  excess  of  importation,  however,  continued  as 
ever. 

At  the  outbreak  of  the  Russo-Japanese  War  in  1904,  resort 
was  had  to  the  domestic  issue  of  exchequer  bonds  and  tempo- 
rary loans,  which  caused  a  stringency  of  monetary  circulation 
and  a  rise  of  prices.  Shortly  afterwards  a  great  amount  of 
foreign  loans  was  floated.  Exchequer  bonds,  domestic  loans, 
etc.,  were  redeemed  by  a  further  increased  issue  of  foreign 
loans,  and  a  great  amount  of  convertible  notes  was  issued. 


EFFECTS   ON    INDUSTRIES 


195 


This  not  only  caused  inflation  of  currency  and  the  rise  of 
prices,  but  also — in  conjunction  with  the  transfer  of  funds 
raised  by  the  foreign  loan — tended  to  encourage  the  importa- 
tion of  foreign  articles.  Therefore,  with  the  expansion  of  the 
total  volume  of  foreign  trade,  there  was  an  annual  excess  of 
importation,  showing,  in  1905,  a  balance  of  167,000,000  yen. 

EXPORTATION  AND  IMPORTATION  OF  MERCHANDISE,  GOLD  AND  SILVER' 


Year 

Merchandise 
Exported 

Merchandise 
Imported 

Excess  of 
Importation 
of 
Merchandise 

Exportation 
of  Gold 
and  Silver 

Importation 
of  Gold 
and  Silver 

Excess  of 
Exportation 
of  Gold 
and  Silver 

Yen 

Yen 

Yen 

Yen 

Yen 

Yen 

J868. 

IS.  553.473 

10,693,072 

4,860,401  » 

1869. 

12,908,978 

20,783,633 

7,874.655 

1870. 

14.543,013 

33,741,637 

19,198,624 

1871. 

17,968,609 

21,916,728 

3,948,119 

1872. 

17,026,647 

26,174,815 

9,148,168 

4,480,896 

3,691,510 

789.386 

1873. 

21,635,441 

28,107,390 

6,471,949 

5,122,927 

3,080,542 

2,042,385 

1874- 

•19,317,306 

23,461,814 

4,144,508 

13,995,202 

1,071,731 

12,923,471 

t87S. 

18,611,111 

29.075,628 

11,364,51? 

14,663,971 

298,322 

14,365,649 

1876. 

27,711,528 

23,964,679 

3,746,849  • 

10,675,701 

8,267,241 

2,408,460 

1877. 

23,344,522 

27,420,903 

4,072,381 

9,441.271 

2,173,499 

7,267,773 

1878. 

25,988,140 

32,874.834 

6,886,694 

8,328,653 

2,189,101 

6.I39.5S2 

1879. 

28,175,770 

32,053,002 

4.777,232 

12,778,864 

3,134,804 

9,644,060 

1880. 

28,395,387 

36,626,601 

8,231,214 

13,222,993 

3.638,230 

9.584,763 

1881. 

31,058,888 

31,191,246 

132,358 

7,490,547 

1,856,147 

5,634,400 

1882. 

37,721,751 

29,446,594 

8,275.i57a 

4,430,198 

6,160,724 

1,730,526" 

1883. 

36,268,020 

28,444,842 

7,823,178* 

3,156,565 

5,451,501 

2,294,936" 

1884. 

33.871,466 

29,672,647 

4,198,  819  s 

5,005,072 

5,611,759 

606,687  • 

1885. 

37,146,691 

29,356,968 

7,789,723s 

4,256,446 

7,546,841 

3,290,395  " 

1886. 

48,876,313 

32,168,432 

16,707,881  » 

9,626,448 

9,171,874 

454.574 

1887. 

52,407,681 

44,304,252 

8,103,429* 

11,035,488 

8,871,266 

2,164,222 

1888. 

65,705,510 

65.455,234 

250,276' 

7,833.444 

8,732,492 

899,048  » 

1889. 

70,060,706 

66,103,767 

3,956,939  " 

5,188,529 

14,173,246 

8,984,717" 

1890. 

56,603,506 

81,728,581 

25,125,075 

13,778,531 

1,200,607 

12,577,924 

1891. 

79,527,272 

62,927,268 

16,600,004* 

14,452,964 

13,888,526 

1  2,435,  562  « 

1892. 

91,102,754 

71,326,080 

I9,776,674a 

9,729.753 

22,883,757 

13,154,004* 

1893- 

89,712,865 

88,257,172 

1,455,693" 

12,289,188 

11,186,487 

1,102,701 

1894- 

113,246,086 

117,481,955 

4,235,869 

34.379.iil 

26,783,653 

7,595,458 

1895. 

136,112,178 

129,260,578 

6,851,600" 

27,301,699 

5,874,164 

21,427,535 

1896. 

117,842,761 

171,674.474 

53,831,713 

11,598,884 

39,142,208 

27,543,324* 

1897. 

163,135,077 

219,300,772 

56,165,695 

19,219,164 

81,466,713 

62,247,549* 

1898. 

165,753,753 

277,502,157 

111,748,404 

86,987,481 

42.563,781 

44,423,700 

1899- 

214,929,894 

220,401,926 

5,472,032 

11,178,247 

20,163,501 

8,985,254" 

1900. 

204,429,994 

287,261,846 

82,831,852 

56,707,063 

11,517,835 

45.189,228 

1901. 

252,349,543 

255,816,646 

3,467,102 

14,049,099 

10,960,750 

3,088,349 

1902. 

258,303,065 

271,731,259 

13,428,194 

2,028,982 

32,161,358 

30,132,376" 

1903. 

289,502,442 

371,135,518 

27,633,076 

19,001,199 

27,807,469 

8,806,270" 

1904. 

319,260,896 

371,360,738 

52,099,842 

107,795,859 

33,946,656 

73,849,203 

1905. 

32i.533.6io 

488,538,017 

167,004,407 

16,354,757 

31,506,973 

15,152,216* 

1906. 

423,754,892 

418,784,108 

4,970,784" 

25,784,436 

47,211,197 

21,426,761* 

1907. 

432,412,873 

494,467,346 

62,054,473 

18,759,285 

8,256,503 

10,502,782 

1908. 

378,245,673 

436,257,462 

58,011,789 

3,772,502 

17,544,486 

13,771.984* 

1909. 

413,112,511 

394,198,843 

18,913,668" 

6,584,327 

79,587.502 

73,003,175" 

1910. 

458,428,996 

464.233,808 

5,804,812 

25,175,091 

17,671,797 

7,503,294 

1911. 

447.433,888 

513,805,705 

66,371,817 

24,398,286 

6,168,268 

18,230,018 

1912. 

526,981,842 

618,992,277 

92,010,435 

28,325,153 

1  1.  544.35  1 

16,780,802 

1913- 

632,460,213 

729,431,644 

96,971.431 

27.093,346 

1,021,351 

26,071.995 

»  Shows  the  excess  of  exportation  in  the  case  of  merchandise,  and  the  excess  of  importation  in 
the  case  of  gold  and  silver. 

xThe  amount  of  foreign  trade  in  the  colonies  and  special  articles  for  the  army 
and  navy  were  not  taken  into  account  in  this  table. 


196       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

Still  the  rise  of  prices  went  on  and  on,  which,  together  with 
the  growth  of  the  enterprising  spirit,  helped  on  the  excess  of 
importation.  So  long  as  there  was  abundant  specie  abroad, 
due  to  foreign  loans,  specie  flowed  in  in  no  small  amount. 
From  1910,  however,  there  was  an  efflux  of  no  small  amount 
of  specie  until  1913. 

In  short,  the  excess  of  importation  and  efflux  of  specie  from 
the  Restoration  until  1881  were  occasioned  by  the  overissue  of 
inconvertible  paper  money.  The  same  phenomenon  which 
occurred  after  the  Sino- Japanese  War  must  be  attributed  in 
the  main  to  the  indemnity  and  the  issues  on  the  security  re- 
serve, although  war  loans  were  responsible  for  it  to  a  small 
extent,  especially  at  the  outset.  The  excess  of  importation 
and  the  outflow  of  specie  was  wholly  due  to  war  loans  and 
conversion  loans.  The  table  on  the  preceding  page  shows  the 
importation  and  exportation  of  merchandise,  gold,  and  silver, 
which  is  intended  to  prove  the  foregoing  statement. 

EFFECTS  ON  DOMESTIC  TRADE 

The  effects  of  the  issue,  redemption,  etc.,  of  the  war  and 
armament  loans  upon  the  domestic  trade  are  either  general  or 
indirect  and  can  not  be  said  to  be  very  clear.  With  the  issue 
of  the  government  paper  money  during  the  war  of  the  Restora- 
tion prices  rose  and  money  interest  became  very  high.  Our 
economic  organization  left  a  great  deal  to  be  desired  and  was, 
moreover,  in  great  disorder.  Notwithstanding  the  strenuous 
endeavors  of  the  government  to  promote  the  public  finance 
and  money  circulation  by  encouraging  productive  industries 
and  the  establishment  of  joint  stock  companies,  all  the  trad- 
ing, exchange  and  shipping  companies  which  had  been  started 
ended  in  failure  immediately  after  their  organization.  In 
!873,  with  the  establishment  of  the  National  Bank  System, 
there  cropped  up  all  sorts  of  enterprises  such  as  railway,  mail 
steamer,  copper  manufacture,  cotton  spinning,  paper  manu- 
facture, gas,  insurance  and  other  companies.  At  the  time  of 
the  Satsuma  Rebellion  in  1877,  however,  the  inflation  of  in- 
convertible paper  money,  together  with  the  increased  issue  of 
bank  paper  money,  gave  rise  to  immense  fluctuations  both  in 


EFFECTS    ON    INDUSTRIES  197 

prices  and  in  money  interest,  and  nipped  in  the  bud  the  enter- 
prises which  had  just  been  cropping  up.  During  the  period 
extending  from  1881,  which  was  a  beginning  of  the  paper 
money  readjustment  scheme,  to  1885,  there  was  a  general  de- 
pression of  the  business  world  and  all  sorts  of  enterprises 
seemed  to  have  gone  to  the  ground.  In  point  of  fact,  however, 
insurance,  transportation,  cotton  spinning  and  the  banking 
business  made  during  this  period  a  salutary  development. 
With  the  establishment  of  the  convertible  notes  system  in 
1886  the  business  world  became  active.  Various  companies 
and  factories  were  started  to  conduct  such  businesses  as  rail- 
way, shipbuilding,  machine  manufacture,  cotton  spinning, 
mining,  textile  industry,  gas,  electric  light,  paper  manufacture, 
marine  product,  brick,  fertilizer,  glass,  engineering  and  other 
companies.  All  sorts  of  stocks  and  bonds  witnessed  a  boom. 
Reaction,  however,  set  in  in  1890,  attended  with  extreme  stiff- 
ening of  monetary  circulation,  and  a  cry  of  panic  was  heard  on 
all  sides.  But  owing  to  the  monetary  relief  afforded  by  the 
government,  and  by  the  Bank  of  Japan,  business  prosperity 
was  restored,  and  after  1892  various  undertakings  promised  a 
salutary  development.  During  the  Sino- Japanese  War  in 
1894-1895  no  small  amount  of  temporary  loans  and  military 
loans  was  floated,  and  a  little  later  armament  loans  were  is- 
sued as  government  undertakings  loans.  Except  at  the  very 
outset  these  did  not  interfere  with  the  projects  of  private 
enterprise.  With  the  restoration  of  peace,  the  receipt  of  in- 
demnity, and  the  expansion  of  specie  reserve,  money  interest 
fell.  As  a  consequence,  such  enterprises  as  railways,  shipping, 
coal  mining,  insurance,  dock  construction,  hydro-electricity, 
cotton  spinning,  sugar  refining,  kerosene  refining,  railway  car 
building  and  other  companies  rapidly  grew  up.  An  unheard- 
of  boom  was  witnessed  in  the  stock  market,  which  naturally  re- 
sulted in  the  springing  up  of  many  bubble  companies.  In 
1 890  a  great  amount  of  convertible  notes  was  issued  in  connec- 
tion with  the  Boxer  Uprising,  which  advanced  prices  and 
brought  about  a  great  efflux  of  specie.  In  consequence  there 
was  a  great  stringency  of  monetary  circulation  after  1891,  and 


198       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

it  was  not  before  1903  that  signs  of  recovery  were  witnessed  in 
the  industrial  world. 

During  the  Russo-Japanese  War  of  1904-1905  the  flotation 
of  domestic  loans  and  temporary  loans  at  the  outset  of  the  con- 
flict discouraged  new  enterprises.  Immediately  afterwards, 
however,  an  immense  amount  of  capital  was  introduced 
through  the  flotation  of  foreign  loans,  which  brought  about 
sluggishness  in  monetary  circulation  and  the  fall  of  money 
interest.  As  a  result,  in  1906,  when  the  war  came  to  an  end, 
the  market  grew  brisk  and  the  stock  market  witnessed  a  great 
increase  of  transactions.  Popular  enthusiasm  seemed  to 
center  upon  new  enterprises.  The  starting  and  the  ex- 
pansion of  the  companies  during  the  period  was  such  that  it 
reached  the  astonishing  figures  of  over  1,600,000,000  yen. 
There  were  started  also  numerous  bubble  companies.  Reac- 
tion came,  and  in  January,  1907,  the  quotation  of  stocks  suf- 
fered a  terrible  slump,  spreading  consternation  and  panic  in 
the  market.  The  banks  and  the  companies  which  stood  upon 
a  feeble  basis  tottered  down  to  bankruptcy.  This  seems  to 
have  proved  a  sort  of  natural  selection,  and  the  normal  state  of 
things  was  about  to  be  restored,  when  the  increased  issue  of 
foreign  loans,  by  way  of  conversion  in  1910,  brought  down  the 
money  interest  and  occasioned  a  sudden  rise  in  prices,  which 
stirred  up  the  enterprising  spirit.  A  reactionary  phenomenon 
was  observed  from  1910  until  1912,  when  stringency  of  mone- 
tary circulation  impeded  the  government  and  private  under- 
takings. 

In  short,  we  may  safely  conclude  that  the  failure  of  enter- 
prises from  the  Restoration  until  about  1873,  the  unsteadiness 
of  enterprises  from  the  Satsuma  Rebellion  until  1881,  the  con- 
traction of  new  enterprises  at  the  outset  of  the  Sino- Japanese 
War,  the  depression  of  enterprises  in  1901  and  the  unsteadiness 
and  fluctuations  of  enterprises  and  stocks  which  ended  in  a 
panic  during  the  Russo-Japanese  War,  are  in  the  main  due  to 
the  flotation  and  conversion  of  war  and  armament  loans. 
The  following  tables,  showing  the  yearly  condition  of  business 
companies  and  negotiable  securities,  tend  to  prove  the  fore- 
going statement. 


EFFECTS   ON    INDUSTRIES 


199 


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CHAPTER  V 
SOCIAL  EFFECTS 

It  is  no  easy  task  to  point  out  the  effects  of  war  and  arma- 
ment loans  upon  social  life.  There  is  no  doubt,  however,  that 
the  increased  issue  of  paper  money  and  convertible  notes,  the 
increase  of  taxes  in  connection  with  the  national  loans  ex- 
penditure, and  the  changes  of  the  money  market,  together  with 
other  circumstances,  had  some  effects  upon  the  prices  of  com- 
modities, wages  and  other  incomes,  burdens  and  savings  of 
individuals.  These  effects  in  turn  must  have  exerted  some 
influence  upon  the  migration  between  town  and  country  and 
upon  migration  abroad.  In  the  following  pages  we  shall 
consider  these  points  in  connection  with  the  statistics  avail- 
able. These  statistics,  however,  do  not  treat  of  the  figures 
prior  to  1889,  which  makes  comparison  very  difficult.  More- 
over, these  points  are  more  fully  treated  in  another  part.  We 
shall,  therefore,  confine  ourselves  to  a  bird's-eye  view  of  im- 
portant points,  so  far  as  the  statistics  exist. 

PRICES 

With  regard  to  the  investigation  of  the  prices  of  commodi- 
ties in  general  we  shall  refer  the  reader  to  another  part,  where 
it  will  be  more  fully  discussed.  We  shall  not  here  go  any  fur- 
ther than  to  pick  out  four  or  five  important  commodities  and 
show  the  statistics  with  regard  to  them.  Index  numbers  of 
general  prices  will  also  be  added  for  the  convenience  of  the 
reader. 

The  fluctuations  of  the  price  of  rice  were  brought  about 
through  divers  agencies  and  are  not  attributable  to  war  and 
armament  loans  alone.  The  price  of  rice  witnessed  a  remark- 
able appreciation  in  1879,  1880  and  1881.  Again  it  rose  in 
1897  and  1898  upon  the  conclusion  of  the  Sino- Japanese  War. 
It  rose  again  in  1906  upon  the  termination  of  the  Russo-Japa- 

201 


2O2       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

nese  War,  which  condition  of  things  continued  till  1912.  There 
is  no  doubt  that  these  appreciations  were  due  to  the  inflation 
of  currency  which,  in  turn,  was  brought  about  by  the  increased 
issue  of  paper  money  and  convertible  notes  in  connection  with 
the  war.  Thus,  the  present  price  of  rice  is  four  times  as  high 
as  that  of  1875. 

The  statistics  of  prices  with  regard  to  salt  and  soy  before 
1885  are  not  available.  Sudden  rises  took  place,  however,  in 
1895,  1897  and  in  1898.  Further,  they  witnessed  remarkable 
appreciations  in  1905,  which  have  continued  to  this  day. 
Their  present  price  is  from  300  per  cent  to  360  per  cent  higher 
than  that  of  1886.  Its  chief  cause  is  to  be  traced  to  the  salt 
monopoly  subsequent  to  1906,  but  at  the  same  time  it  is  statis- 
tically certain  that  the  inflation  of  currency  due  to  the  flota- 
tion of  war  loans  was  also  responsible  for  it.  Moreover,  after 
the  war  the  receipt  from  the  salt  monopoly  formed  the  re- 
source for  the  redemption  of  the  war  loans,  which  makes  the 
connection  between  the  rise  of  the  price  of  salt  and  war  loans  a 
much  closer  one. 

The  statistics  of  the  prices  with  regard  to  sugar  and  kero- 
sene previous  to  1885  are  also  lacking.  They  witnessed  a  re- 
markable appreciation  during  the  Sino- Japanese  War,  and 
rose  still  further  after  the  Russo-Japanese  War.  Sugar 
especially  was  subjected  to  several  increased  taxes  which 
helped  this  rising  tendency.  The  present  prices  of  sugar  and 
kerosene  are  twice  as  high  as  those  of  1886.  The  chief  cause 
lay  in  the  increase  of  taxation.  But  inasmuch  as  this  rise  kept 
pace  with  the  inflation  of  currency,  and  inasmuch  as  the  in- 
crease of  taxes  after  the  Russo-Japanese  War  was  chiefly  for 
the  redemption  of  war  loans,  we  can  not  but  recognize  the 
influence  of  war  loans  in  this  connection. 

The  prices  of  sake  and  tea  did  not  have  similar  tendencies. 
Sake  was  a  taxed  article,  and  the  rate  of  the  tax  was  increased 
several  times.  Moreover,  it  could  not  escape  the  influence 
caused  by  the  appreciation  of  the  price  of  rice.  The  first  sud- 


SOCIAL    EFFECTS  2O3 

den  rise  took  place  during  1879,  1880  and  1881  through  the 
inflation  of  inconvertible  paper  money.  It  witnessed  its  second 
appreciation  after  1895.  The  third  rise  began  in  1905  and 
has  continued  to  this  day.  Its  present  price  is  six  times  as 
much  as  that  of  1875.  The  chief  cause  lies  undoubtedly  in 
taxation,  but  presumably  the  inflation  of  currency  was  also 
responsible.  On  the  other  hand,  tea  was  an  untaxed  article. 
Statistics  are  lacking  with  respect  to  it  prior  to  1885.  The  first 
rise  after  1886  took  place  during  the  period  extending  from 
1894  to  1904.  Its  second  appreciation  was  after  1905.  The 
rising  tendency  was  not  as  remarkable  as  in  other  commodities. 
Its  present  price  is  only  260  per  cent  higher  than  that  of  1886. 
It  was  due  to  the  general  improvement  of  the  standard  of  liv- 
ing and  to  currency  inflation  that  the  price  made  some  appre- 
ciation despite  the  unfavorable  condition  of  the  market. 

The  prices  of  cotton  and  spinningyarn  similarly  appreciated. 
Its  first  advance  after  1886  was  in  1896,  the  second  rise  began 
in  1905,  and  it  kept  up  the  tendency  until  1912.  Present 
prices  are  260  per  cent  to  290  per  cent  higher  than  those  of 
1886.  Both  cotton  and  spinning  yarn  are  untaxed  or  lowly- 
taxed  commodities.  It  was  undoubtedly  due  to  the  general 
trend  of  high  prices,  which  was  caused  by  inflation  of  currency, 
that  there  was  such  remarkable  appreciation  despite  the  un- 
favorable condition  of  the  market. 

Lastly,  about  the  average  index  number:  The  index  num- 
ber prior  to  1886  had  as  its  standard  the  prices  of  commodities 
in  1878.  It  witnessed  a  slight  appreciation  during  the  period 
extending  from  1875  to  1879,  when  there  was  an  increased 
issue  of  inconvertible  paper  money.  The  index  numbers  after 
1887  had  as  their  standard  the  prices  of  1887.  They  showed  a 
gradually  rising  tendency  which  was  especially  remarkable 
after  1895.  The  third  appreciation  began  in  1905,  and  has 
continued  to  the  present  day.  The  present  price  is  250  per 
cent  higher  than  that  of  1887. 


2O4       WAR   AND   ARMAMENT   LOANS:    ECONOMIC    EFFECTS 


i-i   COOO   1-1  IOOO  IO  fN 


--  r^-oo       r^co»o«oo 


t^  t^OO  OO   O^  1-1   CO  O\ 


t^OO   ON  O   1-1   N   CO  Tj-  IO\O  t^-OO   O~>  O   1-1   <S   CO  •**•  lOO  t^OO 


t-».oO  OOOOOOOOOOOOOOOOOO 


oooooooooooooooooooooooooooooooooooooooooooooooooo 


SOCIAL    EFFECTS 


205 


2O6     WAR  AND  ARMAMENT  LOANS:  ECONOMIC  EFFECTS 

INCOMES 

We  have  seen  in  the  foregoing  section  that  the  prices  of  com- 
modities doubled  many  times.  If  the  income  of  the  people 
made  a  corresponding  increase  we  should  have  no  apprehen- 
sion of  the  lowering  of  the  standard  of  living ;  on  the  contrary, 
it  would  be  rather  a  matter  of  congratulation  inasmuch  as  it 
would  indicate  a  natural  course  of  things  in  the  development 
of  the  economic  life  of  the  nation.  If,  however,  the  increase  of 
income  did  not  go  hand  in  hand  with  the  rise  of  prices  it  would 
be  a  matter  of  great  regret.  We  shall  examine,  therefore,  the 
fluctuations  of  income  in  these  paragraphs. 

The  statistics  concerning  the  income  of  the  nation  are  any- 
thing but  perfect.  There  are  some  statistics  indeed  which  are 
based  on  guess  work,  but  even  they  relate  only  to  recent  times 
and  do  not  cover  any  sufficient  space  of  time.  We  shall,  there- 
fore, confine  ourselves  to  the  observation  of  the  amount  of  in- 
dividual income  belonging  to  income  tax,  Class  No.  3,  and  to 


Fiscal 
Year 

Class  I— 
Income  of 
Judicial 
Persons 

Class  II— 
Interest 
on  Public 
Bonds  and 
Debenture 

Class  Ill- 
Individual 
Income 

Total 

Taxpayers 
in  Class  III 

Per  Capita 
Income  of 
Taxpayers 
in  Class  III 

1887. 
1888. 
1889. 
1890. 
1891. 
1892. 
1893- 
1894- 
1895. 
1896. 
1897. 
1898. 
1899    .  . 

Y 

6o,8c 
89,7< 
87,08 
90,71 
94,3: 
93.7C 
123.2; 
139,4^ 
127,5; 
132,6- 
125,91 
H9,6c 
I48,9f 
180,5-: 

en 
>9,< 

>!,< 

o,. 

8, 
4.' 
6,( 

3,; 

7,' 
3,< 
2,. 
O,5 
2,f 
3.. 
6,( 

)87 
>I3 
(24 
98 
t38 
)I9 
48 
>43 
108 
34 
37 
>35 
IS 
>89 

Y 

2,4' 

11,8^ 
12,9: 

I2.9C 
I4,O] 

13.7^ 
10,05 
9,o( 
2Is7* 
33,7? 

l6,2( 
7,21 

n,8j 
14-15 

en 

3,' 

t7,C 
5,: 
5/ 
4.c 

M 

5,5 
9,^ 
4.- 
4." 
1,1 
o,c 
8,4 
1,5 

II 

52 
97 
|.oo 
19 
17 
53 
24 
89 
57 
83 
08 
Si 
55 

Yen 
91,313,444 
80,860,753 
78,881,863 
81,047,372 
82,059,320 
83,453,130 
91,313,444 
99,470,716 
107,553,679 
127,298,087 
147,674.419 
168,480,424 
204,117,462 

253,25X341 
291,256,213 
326,230,305 
366,931,266 
395,262,894 
424,493,678 
466,219,915 
515,457,997 
640,132,021 
689,722,392 
698,004,957 
708,101,914 
765,425,742 

Yen 
91,313,444 
8o,86o,753 
78,881,863 
81,047,372 
82,059,320 
83,453,130 
91,313,444 
99,470,716 
107,553,679 
127,298,087 
147,674,419 
168,480,424 
277,603,069 
365,124,578 
392,851,052 
432,090,791 
478,421,448 
507,067,624 
562,303,149 
6i8,795,998 
671,635,319 
806,602,014 
831,894,512 
824,817,900 
868,923,680 
960,163,986 

Yen 

129,086 
115,643 
115,833 
115.945 
117,094 
124,077 
129,327 
134,732 
151,037 
172,763 
195,292 

587,809 
648,976 
700,576 
755,338 
827,516 
817,079 
1,124,594 
1,231,467 
1,256,535 
1,275,718 
1,342,071 

Yen 

626.410 
682.115 
703.144 
707-743 
712.908 
735-930 
769.914 
798.278 
842.822 
854.780 
862.710 

555.000 
585.330 
723.786 
562.000 
563.638 
635.750 
569.214 
560.060 
555-500 
555.o6o 
495-820 

1900  

1901  
1902  

1903  

1904    

1905  

1906  

1907  

1908  

1909    

1910  

1911  

1912    

SOCIAL   EFFECTS 


207 


Da 
Labor 


Per  Ce 
Male  a 
Femal 


m 

to 


Maso 


TJ-      O        Oi       Oi       O        O 
ro       ro       ro       r*>       ^       ^f 


-O        O       oo 


O\  r^  O  moo 


•  O  oo  M  O  n  ^t"O  f-  t^o  O 


CiinOOOrororoOmoOoOOO 


O  moo  ro  o  rooo  m  N 
>  w  oo  MOO  roOiro*-"  in 


ooo-*inOviHOM 


O       m      Ov 
Ov      oo       ri 


M       ro      m      oo 


ro      m       o 


m      m      ro      o       o 


ro       ^t"       ro 


oo       inro^fmoo       roino 
'tOvmO       OO>omro 


oo       o 
O      <3 


•O       vO       00 


IH        Ov       Oi       O       00 


in      O       m      O      oo 


moo 


M        Oi       ro 

t^      o      t^ 
^1-      m      m 


O        MOO        rO*O        Oi^fOi 


00       00        O 


ro      <O        m 


in      o      t^     oo 


O       MOO       roo       O       roovoooooo       o 


CO  ro   ro   ro 


OO   Oi   Oi   Oi   Oi 


o  oo   o   « 


•*   M   O   O   ro 


in   10   10  o   O   t^   co   oc   oo   oo 


•O   t~   oo   Ov   O   M 
Ol   Ol   Ov   Oi   O    O 


00   00   00   OO   OO   00 


I 

<u 

Q 


2O8       WAR   AND    ARMAMENT   LOANS:    ECONOMIC    EFFECTS 

wages  of  various  laborers.  The  taxable  incomes  are  the  in- 
comes of  people  of  property  and  of  high-class  employers.  The 
aggregate  amount  multiplied  almost  tenfold,  but  the  number 
of  taxpayers  increased  more  than  ten  times.  Thus  the  amount 
of  income  per  capita  rather  showed  a  decrease. 

Wages  (the  income  of  laborers)  progressed  with  the  rise  of 
prices,  but  the  advance  was  only  from  200  per  cent  to  260  per 
cent  and  did  not  keep  pace  with  the  advance  of  such  neces- 
saries of  life  as  rice  and  salt. 

PUBLIC  BURDENS  AND  SAVINGS 

The  most  important  point  which  must  be  investigated  in 
connection  with  income  is  the  burden  upon  the  people  result- 
ing from  public  expenditures.  If  we  deduct  from  the  income 
public  burdens  and  necessary  cost  of  living,  the  remainder 
may  be  said  to  be  the  saving  of  the  nation.  The  increase  and 
decrease  of  savings  have  great  influence  upon  society.  We 
show  in  the  following  table  the  public  burdens  imposed  by 
the  state  and  local  bodies,  and  the  amount  of  postal  savings 
which  is  representative  of  saving  in  general.  The  burden  of 
public  expenditure  remarkably  increased,  so  much  so  that  it  is 
now  five  times  as  much  as  prior  to  the  Sino-Japanese  War. 
The  amount  of  postal  savings  per  capita,  on  the  contrary, 
shows  a  tendency  to  decrease. 

The  tables  on  pages  209  and  210  show  that  the  amount  of  in- 
come and  saving  per  capita  showed  no  signs  of  advance,  that 
the  burden  of  national  expenditures  and  local  rates  suffered  a 
remarkable  increase,  and  that  the  wages  of  low-class  laborers, 
though  showing  an  increase,  did  not  keep  pace  with  the  rise  of 
the  prices  of  commodities.  Thus  the  poorer  classes  found  in- 
creasing difficulty  in  getting  a  living. 

POPULATION 

With  regard  to  the  migration  of  the  population,  we  shall 
consider  both  internal  and  international  migration.  There  was 


SOCIAL   EFFECTS 


2O9 


BURDEN  OF  PUBLIC  EXPENDITURES,  AND  PER  CAPITA  AMOUNT  OF  POSTAL 

SAVINGS  x 


Fiscal 
Year 

Per  Capita 
Amount  of 
National  Taxes 

Per  Capita 
Amount  of 
Local  Rates 

Total 

Per  Capita 
Amount  of 
Postal  Savings 

1870.  . 

Yen 

.48 

Yen 
0.68 

Yen 
2.16 

Yen 

1  8  67 

1880  

.45 

0.76 

2  21 

18  11 

1881  

.62 

0.96 

2  58 

21  09 

1882  

76 

0.98 

2  74 

22  90 

1883  ..... 

66 

0.91 

2  57 

26  42 

1884  

62 

o  88 

2  5O 

•37  26 

1885 

26 

O  75 

2  OI 

10  86 

1886  

.  57 

0.84 

2  .41 

•ij  c-i 

1887.  . 

•  56 

0.78 

2  .  14. 

70  6O 

1888  

-4Q 

0.76 

2  25 

28  52 

1880.  . 

6-* 

O.99 

2  62 

25  47 

1890  .  ... 

47 

.  II 

2  58 

21  5O 

1891  

47 

12 

2  SO 

24  ^5 

1892.  . 

.49 

.  15 

2  .64 

24  O8 

i8gv  . 

.  S4 

.  IQ 

2  71 

24  67 

1804.  . 

87 

.2Q 

7   16 

27  16 

i8qs  . 

2  O2 

A-\ 

•2  4.C 

21  68 

1896  

1  .95 

.69 

5  65 

22  26 

1897.  . 

5.16 

.22 

6  18 

20  68 

1898.  . 

5  .02 

47 

6  4Q 

17  QI 

1800  . 

S  74 

85 

7  CQ 

16  91 

IQOO  .  . 

6.5-? 

-QS 

8.48 

12  .^O 

IQOI  .  . 

5.87 

2  .  IO 

7.97 

II  64 

IQO2  .  . 

6  28 

2  21 

8  40 

IO  48 

IQO1  .  . 

5  ^.4 

2  18 

7  S2 

Q  l6 

IQO4 

5  87 

I  74. 

7  6l 

8  62 

IQOS.  . 

8.83 

1.82 

10  6s 

o  46 

1906.  . 

9  64 

2  O6 

ii  70 

1  1  05 

IOO7  .  . 

12  ^4 

2  4Q 

14  8-; 

12  IO 

1908   .  .  . 

12  75 

2  77 

15  52 

12  62 

I9O9  .  . 

10.60 

1  .01 

11  6^ 

12  Q4 

IOIO.  . 

II  l6 

1  O7 

14  2^ 

I  5  O7 

IQII  .  . 

II  11 

-i  Q5 

H-3Q 

1  6  07 

IQI2 

II  12 

•j  4.7 

14  5Q 

16  06 

1  Based  on  Imperial  Statistical  Year  Book,  Tax  Bureau  Year  Book,  and  A  Survey 
of  Local  Finance,  published  by  the  Home  Department. 

The  per  capita  amount  of  national  taxes  to  1893  was  calculated  by  excluding 
customs  duties.  The  figures  after  1894  are  the  per  capita  amount  of  total  expendi- 
tures of  the  general  account.  This  expedient  was  taken,  because  after  1894  the 
proceeds  of  monopoly,  receipt  out  of  the  sale  of  stamps,  etc  ,  make  the  calculation 
exceedingly  complex. 

Local  rates  are  the  per  capita  amount  of  the  sum  levied  by  "  Do, "  "  Fu,"  Cities, 
Towns,  Villages,  and  "Kumiai."  Miscellaneous  local  receipts  were  excluded, 
to  avoid  repetition.  Postal  savings  are  per  capita  amounts  outstanding  at  the 
end  of  each  year.  It  should  be  kept  in  mind  that  the  number  of  depositors  greatly 
increased,  snowing  the  great  advance  of  the  saving  spirit. 


2IO       WAR   AND   ARMAMENT   LOANS:   ECONOMIC    EFFECTS 
INCOME,  SAVINGS  AND  BURDEN  OF  PUBLIC  EXPENDITURES' 


Year 

Per  Capita 
Amount  of 
Income 

Per  Capita 
Amount  of 
Postal  Savings 

Index  Number  or 
Amount  of  Wage, 
Laborers  in  Tokyo 

Index  Number 
of  Prices 

Per  Capita 
Amount  of 
National  Taxes 
and  Local  Rates 

Yen 

Yen 

Yen 

1873- 

96 

95 

1.88 

1874. 

98 

99 

2-45 

1875. 

8.26 

IOO 

IO2 

2.04 

1876. 

9.42 

104 

102 

1.73 

1877. 

17.38 

IO2 

102 

1-39 

1878. 

20.25 

102 

IOO 

1.75 

1879. 

18.67 

98 

IOO 

2.16 

1880. 

18.33 

87 

93 

2.21 

1881. 

21  .09 

78 

90 

2.58 

1882. 

22.9O 

86 

90 

2.74 

1883. 

26.42 

78 

91 

2.57 

1884. 

37.26 

86 

94 

2.50 

1885. 

30.86 

104 

99 

2.OI 

1886. 

31.53 

H7 

96 

2.41 

1887. 

30.69 

122 

99 

2-34 

1888. 

626.41 

28.52 

126 

103 

2.25 

1889. 

682.11 

25.47 

126 

108 

2.62 

1890  . 

703.14 

23.57 

123 

113 

2.58 

1891  . 

707.74 

24-35 

120 

113 

2.59 

1892. 

712.90 

24.08 

123 

116 

2.64 

1893. 

735-93 

24.67 

124 

119 

2.73 

1894. 

769.91 

23.36 

126 

132 

3-16 

Peasant 

Carpenter 

Sen 

Sen 

1895. 

.   798.27 

23.68 

18.5 

3i-5 

135 

3-45 

1896. 

842.82 

22.26 

20.6 

38.0 

145 

5.6s 

1897. 

854.78 

20.68 

24.7 

43-7 

161 

6.38 

1898. 

862.71 

17.91 

27.5 

46.8 

170 

6.49 

1899. 

16.91 

26.2 

50.6 

172 

7-59 

1900. 

12.30 

29.5 

53-5 

183 

8.48 

190  1  . 

11.64 

32.0 

59-3 

175 

7-97 

1902. 

555-00 

10.48 

32.3 

58.3 

171 

8.49 

J903. 

585.33 

9.  16 

31-3 

58.8 

183 

7.52 

^904. 

723.78 

8.62 

32.5 

58.8 

194 

7.61 

1905. 

563.00 

9.46 

32.0 

60.3 

213 

10.65 

1906. 

563-63 

11.05 

33.8 

64.5 

216 

11.70 

J907. 

635.75 

12.10 

35-8 

74-8 

233 

14.83 

1908  . 

569.21 

12  .62 

38.5 

81.3 

226 

15.52 

-1909. 

560  .  06 

12.94 

38.3 

80.0 

215 

13.63 

T9IO. 

555.50 

15.07 

39-3 

80.0 

221 

14-23 

1911  . 

S55.o6 

16.07 

41-5 

83.2 

245 

14.39 

1912. 

495-82 

16.06 

14-59 

much  migration  from  country  to  city,  on  the  one  hand,  and, 
on  the  other  hand,  migration  abroad.  This  was  a  natural 
result  of  the  concentration  of  capital  and  the  sudden  increase 

1  Wages  for  1873  and  1874  are  the  average  index  number  of  per  diem  amount  of 
the  wages  of  various  laborers,  and  were  calculated  at  the  time  of  the  investigation 
concerning  monetary  reform,  putting  the  average  wages  in  1875  at  100.  There 
have  been  no  similar  investigations  with  regard  to  the  wages  since  1895.  We  have 
therefore  inserted,  above,  the  maximum  and  minimum  wages  of  farmers  and  car- 
penters according  to  the  Statistical  Fear  Book. 

Per  capita  amount  of  national  taxes  is  calculated  upon  the  basis  of  the  annual 
total  amount  of  national  expenditures,  while  per  capita  amount  of  local  rates  is 
calculated  on  the  basis  of  the  local  income,  styled  "  amount  of  imposition  of  each 
Jfiscal  year." 


SOCIAL   EFFECTS 


211 


of  prices  and  burdens.     This  tendency  after  every  great  war  is 
intensified  by  war  loans. 

It  is  rather  difficult  to  get  any  appropriate  statistics  con- 
cerning the  migration  of  city  population.  In  accordance  with 
Cabinet  Instruction  No.  I,  November,  1891,  however,  a  census 
of  the  actually  resident  population  was  taken  every  five  years. 
The  investigations  in  1903  and  1908  show  the  general  tendency 
of  internal  migrations: 


Population  of  Japan 

1903 

1908 

Increase 

Cities  

6,809,976 

8,299,744. 

1,489,768 

Towns     

6,890,29  5 

7,QOI,2'*'* 

1,010,0^8 

Villages  

34,842,465 

35,540,886 

698,421 

Total  

48,542,716 

SI.74I.8S'? 

1,199.117 

The  above  table  shows  that  there  was  an  unmistakable 
tendency  toward  concentration  of  population  in  cities.     It  was 
no  less  evident  that  this  phenomenon  was  most  conspicuous  in 
large  cities,  as  is  shown  in  the  following  table : 
INCREASE  OF  POPULATION  IN  LARGE  CITIES  l 


Cities 

Population  Actually 
Resident,  When  City 
Regulation  Came 
into  Force  (1889) 

End  of  1913 

Increase  Dur- 
ing Twenty- 
four  Years 

Rate  of 
Increase 
Percentage 

Tokyo  

1,189,64.0 

2.O11.12O 

641,680 

46 

Kyoto  

257.22Q 

408,068 

150,819 

58 

Osaka    .  . 

4.26.84.6 

1,187,166 

060,520 

225 

Yokohama.  .  . 
Kobe  

115,012 
111,678 

396,101 
440,766 

281,089 
329,088 

244 
2Q6 

Nagasaki  
Nagova.  . 

50,894 
144,145 

154,351 
447,951 

103,457 
30-5,806 

218 
215 

Kanagawa  .  .  . 
Hiroshima.  .  .  . 
Sendai  

99,370 
79,100 
74,094 

127,267 
159,000 
97,131 

27,897 
79,900 
23,037 

27 

100 
32 

Kure  

51.QO1 

119,060 

65,157 

I  O2 

Fukushima  .  .  . 

47,402 

95,423 

48,021 

122 

Total  

2,849,313 

5,865,804 

3,016,491 

105 

Population  of 
whole  country 

40,072,020 

53,000,538 

12,928,518 

32 

1  Based  on  Population  Statistics,  published  by  the  Imperial  Statistical  Bureau. 

The  City  Regulation  came  into  force  on  April  i,  1889,  in  all  the  above-mentioned 
cities  except  Kure,  a  comparatively  new  city,  in  which  the  same  regulation  was 
enforced  on  October  I,  1902. 


212       WAR   AND   ARMAMENT   LOANS:   ECONOMIC    EFFECTS 


With  regard  to  the  international  migration  the  following 
table  proves  that  the  tendency  of  emigration  of  our  people 
abroad  was  more  remarkable  than  the  incoming  of  foreign 
population,  though  the  latter  was  also  on  the  increase. 

According  to  the  preceding  table  the  rate  of  increase  of  big 
cities  during  the  last  twenty-four  years  was  by  no  means  the 
same.  The  average  rate  of  increase  of  the  population  of  the 
above  twelve  large  cities,  however,  was  105  per  cent,  while 
that  of  the  whole  population  of  the  cities,  towns  and  villages 
was  only  32  per  cent.  The  rate  of  rapidity  in  the  former  case 
was  threefold  more  than  in  the  latter. 

FLUCTUATION  OF  POPULATION  l 


Y«ar 

Japanese  Resident  Abroad 

Foreigners  Resident  in  Japan 

Male 

Female 

Total 

Male 

Female 

Total 

50,515 
105,967 
116,439 
112,716 
139,317 
153,363 
158,648 
303,377 
187,958 
55,472 
123,284 
212,551 

14,558 
34,304 
38,295 
37,035 
45,175 
38,796 
75,476 
117,274 
114,658 
20,317 
61,992 
96,916 

65,073 
140,271 
154.734 
149,751 
184,492 
182,159 
234.124 
420,651 
302,616 
75,789 
185,316 
309,467 

9,662 
10,322 
9,903 
11,569 
12,573 
14,485 
I4.56I 
13,119 
12,539 
10,406 
10,133 

3,762 
3,940 
3,806 
3,928 
3,985 
4,489 
4,347 
4.774 
4.796 
4.491 
4.837 

13,424 
14,262 
13,709 
15,497 
16,558 
18,974 
18,908 
17,893 
17,335 
14.897 
14.970 

1902    

1903  

1905    

1906  

1907  

1908    

1909  

1910  

1911      .... 

1912    

1  As  the  figures  of  foreign  residents  in  Japan  prior  to  1901  can  not  be  obtained 
the  figures  after  that  date  only  are  given.  The  figures  of  Japanese  residents  abroad 
are  based  upon  the  reports  of  government  officials  stationed  abroad,  but  can  not 
be  said  to  be  accurate  owing  to  probable  omissions. 

The  sudden  decrease  of  Japanese  abroad  in  1909  is  due  to  the  decrease  of  the 
residents  in  the  United  States.  The  decrease  in  1910  is,  first,  on  account  of  the 
residents  of  old  Korea  having  been  left  out,  and,  secondly,  on  account  of  the  re- 
ports of  Hawaiian  residents  having  been  omitted.  The  sudden  increase  in  1911 
is  due  to  the  inclusion  of  the  residents  of  Hawaii  in  the  calculation.  The  increase 
in  1912  can  be  accounted  for  by  the  fact  that  the  residents  of  the  State  of  Cali- 
fornia in  the  United  States  and  of  Kwantung  were  added. 


CHAPTER  VI 
CONCLUSION 

The  war  and  armament  loans  of  Japan,  first  inaugurated 
with  the  government  issue  of  paper  money  in  connection  with 
the  Restoration  War,  have  continued  without  a  single  break 
to  the  present  day.  Moreover,  the  amount  of  flotation  went 
on  increasing  on  account  of  the  successive  wars  which  occurred 
nearly  every  ten  years.  At  first  the  expansion  of  currency  was 
brought  about  by  the  issue  of  floating  loans,  such  as  govern- 
ment paper  money,  government  temporary  loans,  Treasury 
bills,  etc.,  while,  later  on,  currency  was  contracted  by  the  issue 
of  funded  loans.  But  their  conversion  usually  had  the  effect 
of  increasing  the  total  amount  of  public  loans.  Especially 
after  the  Russo-Japanese  War  foreign  loans  were  resumed  or 
domestic  loans  were  converted  into  foreign  loans,  both  of 
which  caused  the  issue  of  Treasury  bills  and  the  increase  of 
temporary  loans  for  the  purpose  of  having  transferred  the 
money  thus  raised.  The  issue  was  so  extensive  that  the  issue 
of  convertible  notes  beyond  the  legal  limit  had  to  be  kept  up 
continuously. 

The  effects  upon  the  national  finances  were  conspicuous. 
One  of  these  was  that  the  overissue  of  the  government  paper 
money  and  public  bonds  necessitated  great  readjustment. 
The  most  striking,  however,  was  the  annual  increase  of  na- 
tional loans  expenditure,  which  at  present  occupies  about  one- 
fourth  of  the  total  national  expenditures.  A  great  share  of  the 
taxation  which  had  been  imposed  in  time  of  war  is  still  kept 
up.  If,  to  the  war  and  armament  loans  expenditure,  we  add 
other  military  expenditures,  then  the  total  of  the  war  and 
armament  expenditures  attains  nearly  one-half  of  the  total 
national  expenditures.  The  unproductive  burdens  upon  the 
shoulders  of  the  nation,  therefore,  can  be  said  to  be  by  no 
means  small.  Local  finance  after  the  Sino- Japanese  War 

213 


214       WAR   AND   ARMAMENT   LOANS:   ECONOMIC    EFFECTS 

remarkably  expanded  in  its  expenditures  and  loans.  The 
burdens  of  the  provinces,  therefore,  show  signs,  of  remarkable 
increase. 

As  for  the  effects  upon  the  money  market  the  adjustment  of 
inconvertible  paper  money  brought  about  the  development  of 
the  banking  system,  which,  however,  can  not  be  looked  upon 
as  an  effect  of  war  and  armament  loans.  The  flotation  of 
foreign  loans  after  the  Boxer  Uprising  and  the  Russo-Japanese 
War  kept  up  the  monetary  system  and  contributed  to  supple- 
ment specie  abroad,  which,  however,  was  not  so  much  due  to 
the  fact  that  the  loans  were  floated  in  connection  with  war  and 
armament,  as  that  the  loans  were  floated  abroad.  As  for  the 
effects  upon  money  interest  there  was  some  difference  between 
domestic  and  foreign  loans.  The  flotation  of  domestic  loans 
caused  the  expansion  of  currency  on  the  one  hand,  but  always 
depressed  the  money  market  on  the  other.  The  flotation  of 
foreign  loans,  on  the  contrary,  expanded  the  currency  on  one 
hand  and  brought  down  the  rate  of  money  interest  on  the 
other.  Depreciation  of  money  interest  was  only  temporary. 
It  soon  caused  a  rise  of  prices,  encouraged  the  enterprising 
spirit,  and  the  market  quotation  of  negotiable  securities  wit- 
nessed a  boom. 

Then  tightness  of  money  appeared  and,  not  infrequently,  it 
culminated  in  a  panic.  Moreover,  the  issue  of  big  amounts  of 
war  loans  and  the  continuation  of  increased  taxes  for  the  re- 
demption of  principal  and  payment  of  interest  concentrated 
the  local  funds  to  the  capital,  by  means  of  which  the  centraliza- 
tion of  enterprises  and  labor  took  place.  Local  money  markets 
were  dried  up,  and  were  short  of  labor,  which  brought  great 
losses.  Even  in  cities,  the  fund  raised  by  war  loans  and  taxes 
was  absorbed  by  the  upper  classes,  and  the  lower  classes  were 
always  devoid  of  means.  The  rate  of  interest  affecting  the 
lower  classes  rose,  and  many  a  poor  citizen  fell  a  victim  to  the 
unmerciful  claws  of  a  money  lender. 

With  regard  to  the  effects  upon  foreign  commerce  and 
industries,  the  increased  issue  of  temporary  loans  and  excheq- 
uer bonds  kept  up  the  expansion  of  convertible  notes  and  the 


CONCLUSION  215 

appreciation  of  prices.  There  was  an  annual  excess  of  impor- 
tation over  exportation,  and  consequent  outflow  of  specie. 
The  more  specie  reserve  abroad  was  supplemented  by  the  fund 
raised  by  foreign  loans  the  more  it  encouraged  importation, 
which  caused  no  small  apprehension  in  the  minds  of  many 
people  that  the  conversion  system  was  approaching  a  crisis. 
Home  industries  made  great  strides  with  the  progress  of  the 
age.  But  with  the  flotation  of  war  loans  and  various  changes 
brought  about  in  connection  with  them,  home  industries  were 
subjected  to  frequent  attacks  of  panic.  Their  basis  was  any- 
thing but  sound.  Industrial  companies,  especially,  were  car- 
ried on  a  very  small  scale  and  the  technique  employed  was 
naive  in  the  extreme,  which  made  the  excess  of  importation 
over  exportation  unavoidable.  Moreover,  the  market  quota- 
tions of  negotiable  securities  were  subjected  to  frequent  fluc- 
tuation, which  impeded  enterprises  and  credit,  and  made  the 
gathering  of  capital  next  to  impossible. 

Next,  the  effects  upon  society  at  large  can  not  be  overlooked. 
The  concentration  of  money  in  the  capital  and  among  the  up- 
per classes  made  money  circulation  among  the  lower  classes 
very  tight.  Though  prices  rose  considerably  with  the  expan- 
sion of  currency,  the  rise  of  laborers'  wages  was  merely  nomi- 
nal. The  real  wages,  indeed,  may  be  said  to  have  been  brought 
down.  The  increased  imposition  of  consumption  taxes  for 
the  redemption  of  war  loans  raised  prices,  and  complaints  of 
high  cost  of  living  were  heard  on  all  sides  among  the  lower 
classes. 

The  above  facts  go  to  show  that  war  expenditures  and  war 
loans  exerted  most  unsalutary  influences,  though  Japan  had 
steadily  been  making  remarkable  progress  in  her  political  and 
economic  condition  and  though  the  wars  she  carried  on  were 
mostly  out  of  her  dominions,  and  those  always  attended  with 
victories.  Had  the  wars  been  waged  within  her  territory  and 
ended  in  her  defeat  the  results  would  have  been  appalling. 
In  short,  there  is  no  room  for  any  optimistic  view  of  the 
economic  effects  of  our  war  and  armament  loans. 


INDEX 


Aizu,  5. 

Alcohol,  customs  duty  on,  44. 
Austria,  participation  in  sterling  loans, 
77;  gold  standard,  161. 

Bakan^  162. 

Bank  Note  Regulation,  enforcement  of, 
28;  revised,  118. 

Bank  notes,  amount  issued  (1876-78), 
32;  issue  of  convertible,  33,  116; 
borrowed  from  Bank  of  Japan  on 
gold  deposit,  43;  increased  issue  of 
convertible,  101 ;  issued  against  paper 
money,  no,  115,  118;  issued  (1868- 
1882),  m;  (1891-1899),  1 19;  redemp- 
tion of  (1882-1889),  116;  circulation 
of  convertible,  117;  issued  in  propor- 
tion to  redemption  of  bank  paper 
money,  118. 

Bank  of  Japan,  52;  establishment  of, 
28,  32,  114,  150  et  seq.;  issue  of 
convertible  bank  notes  by,  33,  43, 
114,  n  6,  151;  temporary  loan  of, 
37,  44;  loans  from,  during  Sino- 
Japanese  War,  41-42,  55,  57;  sub- 
scription to  Third  Military  Loan,  49; 
specie  reserve,  57,  73;  redemption  of 
loans,  74;  loans  from,  during  Russo- 
Japanese  War,  81-82;  convertible 
notes  and  government  loans  of, 
(1885-1913),  114,  157;  loan  for 
redemption  of  government  paper 
money,  118,  149,  152;  interest  rates 
of,  (1882-1893),  172  et  seq.;  (1894- 
1903),  177;  (1904-1914),  181;  specie 
owned  by,  186;  aid  to  business,  197. 

Banks,  private,  change  of  national 
banks  to,  155;  concentration  of,  156, 
1 88;  development  of  (1884-1892), 
158;  branches  and  average  amount  of 
paid  up  capital  of,  159. 

Beer,  tax  on,  44. 

Belgium,  participation  in  sterling  loans, 

77,  79- 

Bonds,  Old  Public,  New  Public  and 
Hereditary  Pension,  9;  Voluntarily- 
Capitalized  Pension  Exchange,  9; 
Exchequer,  61,  68;  rise  of  prices  of, 
during  Russo-Japanese  War,  78;  re- 
tirement of  Exchequer,  86;  methods 
of  redemption  of,  88  et  seq.;  effect  of 
paper  money  on  prices  of,  no. 

Boxer  Uprising,  43;  loans  in  regard  to, 
58-59,  100,  176,  197,  215. 


China,  indemnity  paid  by,  41,  57,  162, 
184,  194. 

Cities,  towns  and  villages,  local  finances 
of,  136;  restrictions  on  loans  of,  136 
et  seq.;  "free"  loans  of,  137;  increase 
of  loans  in,  138-139;  distribution  of 
capital  of  companies,  190;  distribu- 
tion of  national  loan,  191 ;  deposits  of 
gold  and  silver  in  banks,  191 ;  rates  of 
interest  on  bank  loans,  192. 

Consolidated  Loans  Regulation  Noti- 
fication, object,  23,  47-48,  52,  120. 

Conversion,  of  national  loans,  119-120, 
181;  first,  122;  second,  123;  third, 
125;  of  paper  money,  151. 

Convertible  Bank  Notes  Regulation, 
33;  revision  of,  118,  151. 

Cotton  and  yarn,  rise  in  prices  of,  203. 

Customs  duty  on  alcohol,  44. 

Education,    loans    for    encouragement 

of,  43- 

England,  participation  in  sterling  loans, 
77-78,  83,  124,  165. 

Exchange  Company,  object  of,  145. 

Expenditures,  of  Restoration,  6,  8,  10; 
for  naval  and  military  armament 
(1876),  8;  (1896),  43;  during  Sino- 
Japanese  War,  40, 42 ;  of  North  China 
affair,  43;  of  Russo-Japanese  War,  61, 
63;  of  redemption,  103;  of  national 
loans,  129  et  seq.;  of  local  loans,  143- 
144;  burden  of  public,  per  capita 
(1879-1912),  209. 

Fifteenth  National  Bank,  30,  147-148; 
loans  by  government  from,  28,  31; 
establishment  of,  29;  privileges  with- 
drawn, 115. 

Factories,  sale  of  government,  32. 

Foreign  deposits,  abolition  of,  183-184. 

Foreign  exchange,  183. 

Foreign    Silver   Exchange,    object   of, 

113,  153- 

Formosa,  conquest  of,  5-6,  8. 
France,  effort  to  underwrite  loans,  78, 

83;  4  per  cent  loan  in,  124,  165. 
Fukuoka,    27;    resources    and    money 

interest,  189  et  seq. 
Fushimi,  5. 

Germany,  manufacture  of  paper  money 
by,  15,  31;  participation  in  sterling 
loans,  77  et  seq.,  83. 

217 


218 


INDEX 


Gold  standard,  43,  186;  effect  of,  161 

•  et  seq.;  in  other  countries,  116;  coin 

and  reserve  (1893-1903),  164;  (1904- 

1913),  166;  causes  of  increase  in  coin, 

1 66. 

Hakodate,  5,  19. 

Hawaii,  213. 

Hiroshima,  41. 

Hokkaido,  loan  for  colonization  of,  13; 

railway  loan,  51-52,  60,  121. 
Holland,  participation  in  sterling  loans, 

77,  79- 

Hongkong  and  Shanghai  Bank,  under- 
writing foreign  loans,  53,  73,  76. 

Imports  and  exports,  of  merchandise, 
gold  and  silver  (1868-1913),  194-195; 
excess  of  imports,  194  et  seq. 

Income  tax,  increase  of,  133-134;  re- 
duction in  (1913),  135;  purposes  and 
amount  of  (1887-1912),  206. 

Indemnity,  176,  194;  fund,  41  et  seq., 
57;  paid  by  China,  162-163,  184; 
appropriations  of,  185;  used  as  specie 
reserve,  186. 

Index  numbers,  fluctuations  in,  203. 

India,  gold  standard,  161. 

India- Australia-China  Bank,  foreign 
loan  underwriting,  53. 

Industry,  loans  for  encouragement  of, 
43,  97  ^  seq.,  102;  effect  of,  on  local 
loans,  140;  boom  in,  180;  effect  of 
loans  on,  196  et  seq.;  capital  of  com- 
panies (1884-1912),  199. 

Interest  rates,  170;  fluctuations  of,  in 
Tokyo  (1868-1881),  171;  (1882- 
1893),  173  et  seq.;  (1894-1903),  177; 
(1904-1914),  182;  of  Bank  of  Japan 
(1882-1893),  172  ft  seq.;  (1894-1903), 
177;  (1904-1914),  181;  for  whole 
country  (1894-1903),  178;  (1904- 
1914),  182;  maximum  and  minimum 
interest  on  loans,  192. 

Ise,  5. 

Ito,  Hirobumi,  proposed  plan  of,  for 
national  banks,  146. 

Kagoshima,  31. 

Kerosene,  tax  on,  133;  rise  in  price  of, 
202. 

Kinsatsu  Exchange  Loan,  issuance  of, 
8,  24,  39;  object  of,  17-18,  23,  25, 
121 ;  Regulations,  18  et  seq.;  as  se- 
curity for  bank  notes,  20,  no,  146; 
revised  regulations  of,  21-22. 

Kobe,  19;  loan  for  railway  construction 
at,  26;  resources  and  money  interest, 
1 89  et  seq. 

Korea,  71;  affair  in,  6,  8,  28,  34,  40. 


Kumamoto,  27. 

Kyoto,    19;   resources  and   money   in- 
terest, 189  et  seq. 
Kyushu,  1 80. 

Liaotung  Peninsula,  162,  184. 
Loans: 

Restoration  to  Satsuma  Rebellion: 
kinds,  3-4;  Kinsatsu  Exchange,  8, 
1 8  et  seq.,  25,  121,  146;  succession 
and  adjustment  of  clan,  9;  Old 
Public,  New  Public,  9;  Foreign 
Voluntarily-Capitalized  Pension 
Bonds,  Hereditary  Pension,  9-10, 
26,  121,  147;  details  of  war  and 
armament  (1868-1877),  26- 

Satsuma  Rebellion  to  Sino-Japanese 
War:  conquest,  28;  Navy,  28-29; 
34  et  seq.,  67,  100;  Temporary, 
28-29,  37;  details  of,  for  the  sup- 
pression of  the  Rebellion,  29,  100; 
amount  of  war  and  armament, 
during  Rebellion,  38;  for  encour- 
agement of  industry,  39;  railway, 
39;  consolidation  of  national,  39. 

Sino-Japanese  War  to  Russo-Japanese 
War:  flotation  of  public,  during,  41, 
i oo;  Temporary,  for  Chinese  Affair, 
44,  100;  Military,  45  etseq.;  appeal 
to  small  investor  to  participate  in, 
47;  Public  Undertakings,  51  etseq., 
IOO,  165;  foreign,  52,  54,  101-102, 
180;  Temporary,  concerning  war 
expenditures,  55-56;  on  deposit  of 
Indemnity  Fund,  57;  Temporary, 
with  regard  to  the  North  China 
Affair,  58-59,  too;  war  and  arma- 
ment, (1895-1907),  60. 

Russo-Japanese  War  to  present:  war 
loans  of,  67  et  seq.,  85;  Exchequer, 
68  et  seq.,  100,  179,  188,  194;  Ex- 
traordinary Military  Expenditures, 
70  et  seq.,  100;  Sterling,  73  et  seq., 
100;  for  redemption  of  military 
bills,  80  et  seq.;  Temporary,  for 
defraying  of  armament  expendi- 
tures, 8 1 ;  Temporary,  for  construc- 
tion of  warships,  81-82,  100;  Tem- 
porary, for  Extraordinary  Military 
Expenditures,  82,  100;  summary 
of,  83;  retirement  of  Exchequer, 
84;  for  nationalization  of  railways, 
financing  colonies,  tobacco  monop- 
oly, pension,  salt  fields  adjustment, 
etc.,  85-86;  French,  85;  increase 
of  foreign,  102,  143,  186,  193-194; 
increase  in  amount  of  principal 
redemption  of,  132. 

Present  Public:  floating  and  ordinary 
(1868-1912),  89;  redemption  of 


INDEX 


219 


(1870-1912),  915  foreign  floating, 
93 ;  amount  and  position  of,  for  re- 
organization of  institutions,  for 
war,  for  expansion  of  armaments, 
for  railway  construction  and  public 
works,  for  exploitation  of  new  ter- 
ritory, for  financial  adjustment, 
94-95;  war  and  armament  (1868- 
1912),  96;  war  and  armament  (in- 
cluding navy),  (1901-1912),  97;  for 
reform  of  institutions,  99;  conver- 
sion of,  119-120;  consolidated,  120- 
121 ;  readjustment  of  national,  126 
et  seq.,  135,  139;  expenditures  of 
national,  130  et  seq.;  redemption 
and  interest  payment  of  foreign 
and  domestic,  131;  increase  in  for- 
eign, 132;  increase  in  local,  137  et 
seq.;  details  of  local,  143-144;  effect 
of  foreign,  on  gold  standard,  164; 
foreign,  for  redemption  of  domestic, 
1 66;  effect  on  business  issue,  re- 
demption, etc.,  of,  196  et  seq. 
London,  184;  loan  flotation,  9;  par- 
ticipation in  loans,  53;  73  et  seq.; 
76  et  seq. 

Manchuria,  71. 

Matsukata,  Count  (Minister  of  Fi- 
nance), 17,  32. 

Meiji  Restoration,  battles,  results  and 
costs  of,  5-6. 

Mimasaka,  5. 

Mitsui  Bank,  sale  of  silver  to,  113. 

Miyazaki,  5. 

Miye,  5. 

Monetary  system,  before  Restoration, 
159;  of  1868,  1 60;  establishment  of 
mint,  160;  legal  bimetallism,  160; 
silver  standard,  160;  gold  standard, 
161  et  seq.;  investigation  of,  161. 

Money  circulation,  47,  112,  139,  175- 
176;  effect  of  loans  on,  in  city  and 
country,  188-189;  stringency  of,  181, 
194. 

Monopolies:  tobacco,  44,  51,  84,  133- 
134;  increase  and  transfer  of  tax  and 
receipts  (1906-1913),  135;  salt,  133- 
134,  202. 

Mukden,  76,  179. 

Nagasaki,  19. 

Nagoya,  180;  resources  and  money 
interests,  189  et  seq. 

National  Banks,  regulation  of  note 
issue  of,  29-30,  in;  loans  to  govern- 
ment by,  28,  31;  number  of,  in; 
establishment  of,  145;  growth  of, 
148;  expiration  of  paper  currency 
issue  privilege  of,  155;  development 
of  (1873-1902),  156. 


National  Bank  Regulation,  effect  on 
paper  money,  24,  30,  no,  115; 
amendment  to,  no-in,  115,  148, 
155;  details  of,  146. 

National  debt,  flotation  and  redemp- 
tion of  (1875-1913),  90;  present 
outstanding,  92  et  seq.,  102;  repay- 
ment of,  125;  readjustment  of,  127. 

New  Public  Loan,  object  of,  9. 

New  York,  participation  in  loans,  73 
et  seq.;  76  et  seq. 

Niigata,  19;  resources  and  money 
interest,  189  et  seq. 

Oil,  increase  in  duty  on,  44,  133-134. 

Oita,  5. 

Old  Public  Loan,  object  of,  9. 

"Open  door"  policy,  193. 

Osaka,  19,  122,  176,  178;  loan  for  rail- 
way construction  at,  26;  run  on 
banks  of,  179;  resources  and  money 
interest,  189  et  seq. 

Pamua  and  Golden  Hill  Company,  53. 

Paper  money,  at  time  of  Restoration, 
7-8;  New  Paper,  8-9,  14  et  seq.,  25, 
31,  100;  "Dajokwansatsu"  and 
object,  8,  10-11,  19,  24-25,  100; 
"Mimbushosatsu"  and  object,  8,  10, 
12-13,  19,  24-25,  100;  disposal  of 
clan,  9, 15;  Clan  Paper  Reserve  Fund, 
9;  objections  to  "Dajokwansatsu" 
and  "Mimbushosatsu",  11-12;  Ex- 
chequer Exchange  Bonds,  25-26; 
Colonial  Exchange  Bonds,  13,  16; 
unification  of,  15,  30;  government 
manufacture  of,  15,  31;  reserve,  16, 
28;  exchange  reserve,  16;  Reserve 
Fund  for  Withdrawal  of,  17;  ex- 
change of,  for  Kinsatsu  Exchange 
Loan,  19,  146;  total  issued  (1876),  21 ; 
(1878),  32;  (1868-1878),  109;  (1868- 
1882),  in;  effect  of  Kinsatsu  Loan 
on  value  of,  22-23;  amount  of  issue  of 
New,  25;  redemption  of,  32,  113, 
116,  146,  149;  exchange  of,  for  silver, 
33;  temporary  loans  for  redemption 
of,  33;  increased  issue  of,  101,  no- 
III,  193;  amount  in  circulation  (1868- 
1882),  109;  (1891-1899),  119;  effect 
of,  on  bond  prices,  no;  readjustment 
of,  no,  114,  1 60,  194,  214;  difference 
in  value  of,  and  currency,  112;  de- 
preciation of,  112,  114;  circulation  of 
government  and  bank,  117;  re- 
habilitation of,  117;  equivalents  in 
gold  and  silver,  117;  adjustment  of 
inconvertible,  118,  127,  215;  conver- 
sion of,  151;  effect  of  specie  on 
issuance  of,  196. 


22O 


INDEX 


Paper  Money  Bureau,  work  of,  19-20. 

Parr's  Bank,  foreign  loan  under- 
writing, 53,  73,  76. 

Patent  medicine,  tax  on,  133. 

Pension  system,  adjustment  of  heredi- 
tary, 9,  85,  121,  147. 

Population,  (1903-1908),  211;  con- 
centration and  increase  of,  in  cities, 
211-212;  fluctuation  of  (1901-1912), 
212. 

Port  Arthur,  surrender  of,  76,  179. 

Postal  savings,  per  capita  (1879-1912), 
209;  (1873-1912),  210. 

Prices,  fluctuation  of,  30,  32,  113,  176, 
179,  194;  (1868-1912),  168-169;  of 
commodities  (1875-1912),  20 1  et  seq. 

Public  Undertakings,  loans  for,  39,  51 
et  seq.;  94-95;  (1870-1912),  98;  effect 
of  loans  for,  on  gold  standard,  164- 
165. 

Railways,  loans  for  construction  of,  26, 
51,  85,  94;  Nakasendo  Railway  Loan, 
39,  98,  121 ;  loans  for  expansion  and 
nationalization  of,  43;  loans  (1870- 
1912),  98;  loan  of  South  Manchu- 
rian,  180. 

Redemption,  methods  of  bond,  69,  74, 
79,  88;  of  National  debt  (1875-1913), 
90;  of  loans  (1870-1912),  91;  size  of 
fund  for,  102-103;  of  paper  money, 
32,  113-114;  (1882-1899),  116;  of 
bank  notes  (1882-1899),  116;  of 
national  loans,  127  et  seq.;  payment 
of  domestic  and  foreign  loans,  131; 
effect  of  establishment  of  banks  on 
note,  153. 

Regulations:  Kinsatsu  Exchange  Loan, 
21-22;  enforcement  of  bank  note,  28, 
118;  convertible  bank  notes,  33,  118, 
151;  Sake  manufacturing  tax,  32, 
113;  Sinking  Fund,  127  et  seq.; 
national  bank,  146. 

Revenue,  sources  of,  for  expenses  of 
Restoration,  6-7;  sources  of,  during 
the  Sino-Japanese  War,  40,  42; 
sources  of,  during  Russo-Japanese 
War,  62,  66. 

Rice,  172,  178,  194;  fluctuations  in 
price  of,  201-202. 

Russia,  gold  standard,  161. 

Russo-Japanese  War,  92,  126,  128,  133; 
expenditures  of,  61  et  seq.;  war  fund, 
66. 

Saga,  5,  27. 

Sake,    Manufacture    Tax    Regulation, 

32;  revision  of,  113;  rise  in  price  of, 

202-203. 


Salt,  monopoly  of,  133-134,  202;  rise  in 
price  of,  202. 

Sanuki,  5: 

Satsuma,  27. 

Satsuma  Rebellion,  27,  36,  113,  194; 
paper  money  issue  to  cover  expend- 
itures of,  16,  25,  29,  31,  no;  num- 
ber of  men  engaged  in,  27;  cost  of, 
27-28;  increase  in  amount  of  principal 
redemption  during,  132. 

Shinano,  5. 

Shiroyama,  27. 

Sinking  Fund  Regulation,  127  et  seq. 

Sino-Japanese  War,  40,  70,  72,  100,  136; 
expenditures  of,  42,  55;  increase  in 
amount  of  principal  redemption,  132. 

Soy,  fluctuations  in  price  of,  202. 

Specie  reserve,  15,  17,  57,  73,  112,  175- 
176;  expansion  of,  74,  116-117,  194, 
197;  amount  of  (1891-1899),  119;  ac- 
cumulation of,  abroad,  182-183,  216; 
receipts,  disbursements  (1895-1903), 
184-185;  transfer  of  indemnity  to, 
1 86;  government-owned,  abroad 
(1904-1913),  187. 

Stamp  duty,  increase  of,  133-134. 

Steel  foundry,  loa  n  for  establishment  of, 

Si.  54-55- 

Succession  tax,  133-134. 
Sugar,  tax  on,  44,  133-134;  rise  in  price 

of,  202. 
Surplus  fund,  during  Russo-Japanese 

War,  62-63. 
Switzerland,    participation   in   sterling 

loans;  77,. 79. 

Takamori,  Saigo  (head  of  Satsuma  Re- 
bellion), 27. 

Takasaki,  5. 

Taxes,  increase  of  sake,  44,  133;  crea- 
tion of  beer  and  sugar,  44;  increase 
due  to  North  China  Affair,  59;  in- 
crease during  Russo-Japanese  War, 
65,  133;  increase  in,  due  to  national 
loan  expenditure,  132-133;  increase 
of  land,  business,  soy,  sugar  consump- 
tion, mining,  bourse,  registration, 
spirituous  liquor,  customs  duties,  to- 
bacco, woolen  textiles,  kerosene  (1904- 
1905),  133-134;  decrease  in  (1910), 
135;  annual  increase  and  transfer  of, 
and  monopoly  receipts  (1906-1913), 
135;  special,  1 88;  per  capita  amount 
of  (1879-1912),  209;  (1873-1912), 
210. 

Tea,  rise  in  price  of,  202-203. 

Telephone  exchanges,  loan  for  extension 
of,  51,  54- 

Toba,  5. 


INDEX 


221 


Tobacco,  51,  84;  rise  in  monopoly  prices 
of,  44,  133-134- 

Tokyo,  5,  19,  122,  178,  180;  loan  for 
railway  construction  at,  26;  fluctua- 
tion of  interest  rates  in  (1868-1881), 
171;  (1882-1893),  173;  (1894-1903), 
177;  (1904-1914),  182;  resources  and 
money  interest  of,  189  et  seq. 

Tokyo  Stock  Exchange,  underwriting 
by,  123. 

Traveling  tax,  creation  of,  133-134. 

United  States,  participation  in  loans, 
77-78,  83;  gold  standard,  161;  effect 
of  panic  in,  180;  decrease  of  Japanese 
population  in,  212. 


Usury  law,  170. 

Wages,  216;  of  laborers   (1894-1911), 

207. 
Warships,    program   for   building,   34; 

new,  during  Russo-Japanese  War,  67; 

loans  for  construction  of,  82,  182. 

Yamagata,  5. 

Yokohama,  19,  180;  loan  for  railway 
construction  at,  26;  resources  and 
money  interest,  189  et  seq. 

Yokohama  Specie  Bank,  foreign  loan 
underwriting,  53,  73,  76;  loan  to  gov- 
ernment, 80;  purpose  of,  113,  183; 
effect  of  establishment  on  redemption 
of  notes,  153;  other  services  of,  154. 


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